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Compliance
Compliance occurs when the parties comply with the conditions (or terms) of the contract. Failure to comply with the material terms of the contract may lead to a claim of breach of contract by the opposing party. Sometimes, it is clear that compliance is lacking. For example, consider a party who sells goods and agrees to deliver them by a certain date. The date comes and goes, with no delivery. The seller clearly is not in compliance.
State laws can vary on the level of compliance that is required with various types of contracts to avoid a finding of breach. Thus, it is always important to check the law of the particular state in which the contract is drafted. In some instances, the law will require “strict compliance,” which means that the parties must comply with all of the formal terms of the contract and almost any failure will demonstrate a lack of compliance.
In other instances, the law requires only “substantial compliance.” Substantial compliance occurs when the broader objectives of the contract have been met, but technically, not all of the formal requirements have been met. Consider our example above concerning the delivery of goods. Assume that the delivery came one day late, but when it arrived, all other requirements of the contract were met. Because most state laws prefer to uphold contracts when possible, it is likely that the seller would be determined to have substantially complied with the contract and a breach of contract claim would not prevail.
Frequently Asked Questions
What’s the difference between strict and substantial compliance?
Strict compliance requires meeting every formal term of the contract, so nearly any deviation counts as a failure. Substantial compliance means the main purpose of the agreement was met even though some technical requirement wasn’t. Courts often prefer substantial compliance because they’d rather uphold a contract than void it, but which standard applies depends on state law and the contract type.
Is every missed contract term a breach?
No. Only failure to comply with a material term typically supports a breach claim. Minor or technical shortfalls that don’t defeat the purpose of the agreement often don’t rise to breach, especially where substantial compliance is the standard. Whether a term is material depends on how central it is to what each party bargained for.
How do teams track contract compliance obligations?
Most teams start by pulling key obligations out of each agreement, like delivery dates, reporting duties, insurance requirements, and payment terms, then assign an owner and a due date to each one. Software helps here. ContractSafe stores your executed contracts in one searchable place and sends alerts ahead of key dates so obligations don’t slip past quietly.
