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The role of “performance” in business contracts

On Behalf of | May 29, 2023 | Business Litigation |

Business contracts form the backbone of any commercial relationship, setting out the terms and conditions of a business agreement. A critical aspect of these contracts is performance, which refers to the act of fulfilling contractual duties as agreed upon by the parties involved.

If you are a business owner, it is helpful to understand how “performance” can impact your business contracts.

Different types of performance

In the realm of business contracts, parties can perform their obligations fully, partially or not at all. Full performance occurs when all parties fulfill their obligations as per the contract. Partial performance means the party has fulfilled some, but not all, of their obligations. Non-performance refers to the scenario where they have not completed any of their contractual obligations.

Performance and breach of contract

Performance plays a significant role in determining whether a breach of contract has occurred. If a party fails to perform its contractual obligations, the courts may consider it a breach of contract. This can result in penalties or legal action, depending on the terms of the contract and the severity of the breach.

Performance as a tool for contract resolution

Performance is also a critical factor in resolving disputes that may arise during the execution of a contract. If a dispute arises, parties often refer to the performance of contractual obligations as a way to determine the validity of their claims. By assessing performance, businesses can resolve disagreements and ensure the contract continues to serve its intended purpose.

Understanding the role of performance in business contracts paves the way for productive commercial relationships. The concept of performance emphasizes the importance of responsibility, accountability and commitment in business contracts. For a robust commercial ecosystem, parties should strive to fulfill their contractual obligations, thereby bolstering trust and fostering successful business engagements.