Last edited 01 Jan 2021

Non-performance in the construction industry

Non-performance is a general term that describes a party which fails to perform; in fact, the term can cover all forms of failure in performance. A student who fails end-of-year exams may be regarded by the school as a non-performer. In this respect, non-performance is not contractually linked – the student never promised to do well and there was no contact entered into, written or otherwise.

In simple terms, a contract is a legally-binding promise. From a legal perspective, the basis of every contract is that all parties must fulfil all of the contract's terms. Non-performance occurs when one party to the contract does not fulfil the contract terms – failing to live up to their contractual obligations. Such a failure is not necessarily a breach of contract although it could lead to a breach of contract.

A breach of contract in English Law is non-performance that is not excused because it is the non-performance of a contractual obligation, i.e. a promise was made and was not kept. A breach of contract entitles the innocent party to receive damages from the guilty party. It may also allow the innocent party the right to terminate the contract.

An example of non-performance is a contractor who fails to provide sufficient labour, materials or equipment to a project, leading to a delay to the completion date.

Bonds can provide a degree of protection for the client. Bonds are an undertaking by a bondsman or surety to make a payment in the event of non-performance. Bonds can be 'on demand' or 'conditional', with conditional bonds requiring that the client provides evidence of the contractor's non-performance, and that as a consequence the client has suffered a loss.

[edit] Refusal to perform or declaration of non-performance

A declaration of non-performance is another form of non-performance. One party declares they are abandoning any further performance under the contract or refuses to fulfil an essential aspect of the contract. In this case, the innocent party can discharge themselves from any further performance obligations.