Contract Performance

What happens to contracts once they are created?

In most cases they are performed. But how we know when the performance is good enough? For example, in a construction contract that specifies a certain type of plumbing type, does another equally functioning pipe satisfy the contract? The courts are frequently called upon to resolve this type of conflict. If society wishes to carry out the intent of the parties as manifested by their contract, there must be a perfect performance and anything less will not be satisfactory. This may work a great hardship when the contract is performed almost perfectly, but not quite. Should protection from oppression and hardship be factors in determining whether the imperfect performance was good enough? As another problem, can the parties to a contract undo their contract? Or is a contract once entered into a vested and unchangeable obligation? What effect do external circumstances have upon the contract? If the contract made no provision for an unforeseen event that renders performance impossible, should it be held that a party is not released from liability when such circumstances arise? If society wants to carry out the intent of the parties as manifested by their contract, it will make them adhere to that intent regardless of what happens. But again the social force of protecting from hardship and oppression raises the question whether society wants to carry out the intent of the parties by enforcing the letter of the contract when such external factors have occurred. Also facing society is the question of whether a contract can be ended by the operation of law. Again if the furthering of the intent of the parties is the primary concern of society, it should be held that if the contract was valid when made nothing thereafter could happen to invalidate or discharge it. Opposed to this supremacy of the contract is the social purpose of protecting the general welfare by applying the rules of law that would invalidate the contract.

Discharge by Performance

A contract is usually discharged by the performance of the terms of the agreement. In most cases, the parties perform their promises and the contract ceases to exist or is thereby discharged. Nature of PerformancePerformance may be the doing of an act or making of payment.

Tender of Performance

An offer to perform is known as a tender. If performance requires the doing of an act, a tender that is refused will discharge the party offering to perform. If performance requires the payment of a debt, however a tender that is refused does not discharge the debt. But it stops the running of interest and prevents the collection of court costs if the party is sued , providing the tender is kept open and the money is produced in court. A valid tender of payment consists of an unconditional offer of the exact amount due on the date when due or an amount from which the creditor may take what is due without the necessity of making change. The debtor must offer legal tender, or in other words, such form of money as the law recognizes as lawful money and declares to be legal tender for the payment of debts.

The offer of a check is not a valid tender of payment, as a check is not legal tender even when it is certified. Tender of part of the debt is not a valid tender. In addition to the amount owed, the debtor must tender all accrued interest and any costs to which the creditor is entitled. If the debtor tenders less than the amount due, the creditor may refuse the offer without affecting the right to collect the amount which is due. If the creditor accepts the smaller amount , the question arises whether it has been accepted as payment or account or as full payment of the balance which was due. Payment When payment is required by the contract, performance consists of a payment of money or, if accepted by the other party, the delivery of property or the rendering of services.