Thursday, June 9, 2011

Substantial Performance Doctrine in contract dispute

The Substantial Performance Doctrine
Substantial performance is defined as "performance of the primary, necessary terms of an agreement." Black's Law Dictionary 1252 (9th ed. 2009).
The doctrine of substantial performance is not available to a party when that party has made a willful departure from the terms of an agreement or omitted essential points of a project. See E.P. Towne, 242 S.W.3d at 125; Smith v. Smith, 112 S.W.3d 275, 279 (Tex. App.--Corpus Christi 2003, pet. denied).
The substantial performance doctrine originated and is still mostly used in the context of construction contracts. See Vance v. My Apartment Steak House, Inc., 677 S.W.2d 480, 482 (Tex. 1984); Turner, Collie & Braden, Inc. v. Brookhollow, Inc., 642 S.W.2d 160, 164 (Tex. 1982); RAJ Partners, Ltd. v. Darco Constr. Corp., 217 S.W.3d 638, 643 (Tex. App.--Amarillo 2006, no pet.); Beard Family P'ship v. Commercial Indem. Ins. Co., 116 S.W.3d 839, 844 (Tex. App.--Austin 2003, no pet.).
But the doctrine has also been expanded to other types of contracts. See, e.g., E.P. Towne Ctr. Partners, L.P. v. Chopsticks, Inc., 242 S.W.3d 117, 124-25 (Tex. App.--El Paso 2007, no pet.) (applied to settlement agreement); Geotech Energy Corp. v. Gulf States Telecomms. & Info. Sys. Inc., 788 S.W.2d 386, 390 (Tex. App.--Houston [14th Dist.] 1990, no writ) (applied to contract for sale and installation of telephone system); Continental Dredging, Inc. v. De-Kaizered, Inc., 120 S.W.3d 380, 394 (Tex. App.--Texarkana 2003, pet. denied) (applied to contract for dredging services). The down payment and purchase price of property set forth in an agreement are considered essential terms of that agreement. See Liberto v. D.F. Stauffer Biscuit Co., 441 F.3d 318, 324 (5th Cir. 2006) (noting that Texas courts generally construe essential terms of contract to include price to be paid). SOURCE: Austin Court of Appeals - 03-09-00713-CV - 6/3/11
Related terms: construction law, contractors, sub-contractors, draws, retainage

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