Substantial Performance in UK Law

When, however, one looks at the aggregate of the number of defects that he held to have been established, at the importance of some of those defects, and at the way in which some of them prevented the installation being one that did what was intended, I find myself, like my Lord, quite unable to agree that there was a substantial performance by the Plaintiff of this lump-sum contract.

It is upon the application of that converse rule that the Plaintiff's case here fails. This rule does not work hardly upon a contractor if only he is prepared to remedy the defects before seeking to resort to litigation to recover the lump sum. It is entirely the fault of the contractor in this instant case that he has placed himself in a difficulty by his refusal on the 4th December, 1969, to remedy the defects of which complaint was being made.

I would not regard it as justified to extend the time limit indefinitely, for I do not think that Parliament would have so intended. I would suggest that one should ask if there has been substantial observance of the time limit. What will constitute substantial performance will depend on the facts of each case, and it will always be necessary to consider whether any prejudice has been caused or injustice done by regarding the act done out of time as valid.

First, if the loss is the disappointment at there not being provided what was contracted for, it seems to me difficult to measure that loss by consideration of the cost of repair. Fourthly, the "loss" constituted by a breach of contract has usually been recognised as calling for an award of nominal damages, not substantial damages.

I turn now to the broader ground on which Lord Griffiths decided the St. Martin's case. He held that the building contractor (B) was liable to the promisee (A) for more than nominal damages even though A did not own the land at the date of breach. He held in effect that by reason of the breach A had himself suffered damage, being the loss of the value to him of the performance of the contract.

A good example of what would come within the scope of the statute is given at paragraph 14–070 of Chitty. The editors postulate a person dealing as a consumer with a holiday tour operator who agrees to provide a holiday at a certain hotel at a certain resort, but who claims to be entitled, by reference to a term of the contract to that effect, to be able to accommodate the consumer at a different hotel, or to change the resort, or to cancel the holiday in whole or in part.

The court will not grant an injunction in either case unless there has been a lack of good faith. The justification for this lies in the commercial purpose of the bond. Such a bond is, effectively, as valuable as a promissory note and is intended to effect the 'tempo' of parties' obligations, in the sense that when an allegation of breach of contract is made (in good faith), the beneficiary can call the bond and receive its value pending resolution of the contractual disputes.