Tolerating Non Performance of a Contract

Tolerating Non Performance of a Contract: What You Need to Know

Contracts are essential in any business agreement, as they provide a clear understanding of each party`s responsibilities and obligations. However, despite the best efforts to create a legally binding document, circumstances may arise that prevent one party from fulfilling their obligations. When this happens, it can be challenging to know how to proceed and whether to tolerate non-performance.

Before you decide whether to tolerate non-performance, it is important to understand your legal rights and obligations. Under the law, a breach of contract occurs when one party fails to perform as promised. Breaches can be categorized as material or immaterial, depending on the severity of the breach.

A material breach is a significant failure to perform a contract`s essential terms, such as not delivering goods or services as promised. In contrast, an immaterial breach is a minor or inconsequential failure to perform, such as delivering goods a day later than agreed upon.

If a breach of contract occurs, the non-breaching party has several options. They can terminate the contract, sue for damages, or choose to tolerate the non-performance. Tolerating non-performance means that the non-breaching party allows the breaching party to continue with the contract despite the breach.

Tolerating non-performance can be a good option in certain circumstances, such as when the breach is minor or the breaching party has a valid excuse for not performing. For example, if a supplier is late delivering goods due to an unexpected shortage of materials, it may be in the non-breaching party`s best interest to tolerate the non-performance rather than terminate the contract.

However, tolerating non-performance requires careful consideration. If the non-breaching party decides to tolerate the non-performance, they must make it clear that they are doing so only temporarily and that the breaching party must still fulfill their obligations in the future. If the non-breaching party fails to make this clear, they risk losing their right to enforce the contract`s terms in the future.

Additionally, if the breach is material, tolerating non-performance may not be a viable option. In such cases, the non-breaching party may choose to terminate the contract and sue for damages.

In conclusion, tolerating non-performance can be a valid option in certain circumstances, but it requires careful consideration and a clear understanding of your legal rights and obligations. If you are uncertain about whether to tolerate non-performance, it may be helpful to consult with a legal professional to ensure that you make an informed decision.