Ideally people are very particular about the language in their contract. Each sentence in their contract should be carefully crafted to reveal their exact preference for a transaction. In the real world, contracts are not written perfectly, and there are frequently disputes over what can constitute a breach. Sometimes, an act can be an immaterial breach such that the promisor of the broken contractual obligation owes no monetary damages, or does not lose any other rights under the contract in which the promisor made an immaterial breach.
A famous case that examines this issue is the 1921 case before the New York Court of Appeals, “Jacob & Youngs v. Kent.” In this case, a buyer requested that a builder use a specific manufacturer of pipe in the installation, but the builder ultimately used pipes manufactured by a company other than the manufacturer specified in the contract. The buyer then refused to pay the final payment of the contract citing that the pipes were not from the manufacturer that the buyer preferred.
The Court considered three main theories for this case. The first was the perfect tender rule. The perfect tender rule is the theory that a promisor must fulfill a promise perfectly, to the exact specifications of the contract, in order to receive payment from a promisee. The Court did not choose to apply this rule in this case due to concerns over minor or trivial errors being a pretext for buyers of goods and services to not pay for goods and services that they have promised to pay for.
The Court also considered the independent promise rule, which is a theory that argues that one side’s failure to perform a promise does not excuse the other side from fulfilling their promise. If a promisee is unhappy with a promisor’s performance then under the independent promise rule they are not allowed to retaliate by withholding their promise; they can only seek remedies in court or make a settlement with the promisor that breached. The court did not want to apply this theory in this particular case because the Court felt that this would incentivize breaches and poor performances of promises.
The Court instead adopted a middle ground rule known as the “substantial performance rule.” The substantial performance rule looks at how willful a promisor’s breach is, and at how much a promisor’s breach impacts the substance of the transaction. If a breach is substantive enough, or willful enough, then the promisee might not have a duty to pay for the full value of the good or service.
If you have suffered from a breach of contract but still have obligations under the contract, you may want to speak with an experienced local contract lawyer to find out which standard or rule might apply to your situation.