6.1 Performance & Discharge

Every contract question on the NALA Certified Paralegal (CP) Knowledge Exam ultimately asks one of two things: was a duty breached, and is that duty now discharged? This section covers the performance side of that analysis — when doing the work ends the obligation, when defective performance ends it anyway, and when events or agreements excuse performance altogether.

Complete vs. Substantial Performance

Complete performance means the party has done exactly what the contract required. Nothing remains; the duty is discharged and the other party's corresponding duty (usually payment) becomes absolute.

Substantial performance is the common-law doctrine that saves imperfect performers from forfeiture. If a party performs in good faith and the deviation is minor — the purpose of the contract is still substantially achieved — the performance counts. The other party must perform (pay), but may deduct damages for the deficiency. The classic example is the construction contractor who completes a building with trivial deviations from the specifications: the owner cannot refuse to pay the contract price, but can recover the cost of correcting the defects (or the diminished value, if correction would involve economic waste).

The doctrine applies almost exclusively to construction and service contracts. It does not apply to contracts for the sale of goods — those are governed by the Uniform Commercial Code's perfect tender rule (Section 6.3). It also never rescues a party whose shortfall is material.

Material Breach and Its Consequences

A material breach is a failure so significant that it defeats the essential purpose of the contract. Its legal effects are dramatic:

1. The non-breaching party's own remaining duties of performance are discharged — they may stop performing.
2. The non-breaching party may sue immediately for total breach damages.

A minor (non-material) breach, by contrast, gives the injured party a damages claim but does not excuse their own performance. Courts weigh several factors to distinguish the two, drawn from the Restatement (Second) of Contracts: the extent to which the injured party is deprived of the benefit reasonably expected, the extent to which the injured party can be adequately compensated in money, the extent of forfeiture the breaching party would suffer, the likelihood the breaching party will cure, and the good faith of the breaching party.

Exam trap: the order of performance matters. A material breach by the party who was supposed to perform first excuses the second party entirely. If a court later decides the breach was only minor, the party who walked away is itself in breach. Paralegals drafting demand letters should never advise a client to stop performing without a solid materiality analysis.

Discharge by Agreement of the Parties

Parties can end contractual duties the same way they created them — by agreement. Know these four devices:

• Mutual rescission — both parties agree to call off the contract. If neither has fully performed, each party's surrender of rights is consideration for the other's.
• Accord and satisfaction — the parties agree (accord) that one will render different, substituted performance, and the performance is then rendered (satisfaction). Only the satisfaction discharges the original duty; an unperformed accord leaves the original claim alive. This is the classic mechanism for settling a disputed debt with a lesser payment.
• Novation — a new party is substituted for an original party with the consent of all involved. The departing party is completely discharged — the key difference from a delegation, where the delegator remains liable.
• Release — a writing surrendering a claim. Under modern law and the UCC, a written release generally needs no new consideration.

Discharge by Supervening Events

Three related doctrines excuse performance when the world changes after formation:

• Impossibility — performance is objectively impossible: it cannot be done by anyone. Classic triggers: destruction of the subject matter, death or incapacity of a party essential to personal performance, or a supervening change in law making performance illegal. Subjective impossibility ("I can't afford it") is never an excuse.
• Impracticability — the modern expansion codified in UCC § 2-615 and the Restatement. Performance remains technically possible but would be extraordinarily and unreasonably burdensome because of an unforeseen event whose non-occurrence was a basic assumption of the contract. Routine market shifts, price increases, and a supplier's failure are usually not enough — the most frequently tested trap.
• Frustration of purpose — performance is still possible, but a supervening event has destroyed the party's principal purpose for contracting, known to both parties. The coronation-case paradigm: a room rented to view a parade that is canceled. The lessee need not pay even though paying is perfectly possible.

A party whose duty is discharged by one of these doctrines is excused; both parties walk away, generally with restitution of any benefits already conferred.

Anticipatory Repudiation

Anticipatory repudiation occurs when, before performance is due, a party makes a definite and unequivocal statement or voluntary act indicating it will not perform. Mere expressions of doubt, requests for changes, or "I'm not sure we can deliver" do not qualify — another favorite exam distinction.

Upon repudiation, the non-breaching party may:

1. Treat it as an immediate total breach and sue at once (no need to wait for the performance date);
2. Suspend its own performance and await performance for a commercially reasonable time; or
3. Ignore the repudiation and continue to urge performance — but it must stop incurring avoidable damages once repudiation is clear (the mitigation duty, Section 6.2).

The repudiating party may retract the repudiation at any time before the other party materially relies on it, brings suit, or indicates it considers the repudiation final. A proper retraction restores the contract — unless the other party has already canceled or changed position in reliance.

Paralegal Scenario

Your firm's client, a catering company, contracts to serve 300 meals at a conference. Two weeks before the event, the venue emails: "We are definitely canceling all events and will not host your caterer." That is a definite, unequivocal repudiation. The client may sue immediately for lost profits, may suspend its own purchases, and — critically — must not keep buying perishables after the email, because those costs are avoidable damages a court will not award. If the venue calls the next day to retract before the client has canceled suppliers or sued, the contract stands.