Question

Jason runs a business installing home entertainment systems into his clients’ homes. It is discovered that some of his installations have been faulty. In which of the following scenarios would Jason most likely be able to claim part of the contract price on the basis of substantial performance?

Select one:
a. The contract price is $30,000, and the cost of rectifying the defects is $2,000.
b. The contract price is $4,000, and the cost of rectifying the defects is $2,000.
c. The contract price is $7,000, and the cost of rectifying the defects is $7,500.
d. None of the other scenarios would allow Jason to claim part of the contract price, as full and exact performance is required in order to be paid.

Answer 1

If a contract or part of a divisible contract is substantially performed, the party will be entitled to the contract price less the cost of rectifying the defects in the performance. Where the nature of defect is minor and the cost of rectifying the defect is 10% or less than the contract price, the party can claim part of the contract price on the basis of substantial performance.

In the given case, Option (a) is correct since the contract price is $30,000 and the cost of rectifying the defects is $2,000 which is less than 10% of the contract price. Hence Jason would be able to claim part of the contract price on the basis of substantial performance,

The correct answer is (a)