Discover everything you need to know about managing and tracking contract performance in this Juro deep dive.
Getting a contract signed is one thing. Actually performing that contract is another. But businesses often spend most of their time trying to get contracts over the line, and not enough time thinking about how they’ll track and manage their obligations once they do.
In this definitive guide to contract performance, let’s run through what contract performance means, and what businesses like yours can do to stay on top of your contractual obligations in 2024.
What is contract performance?
Contract performance is the process of fulfilling the promises made in a contract. For parties to perform a contract successfully, they have to deliver the results they’ve promised in the agreement, and usually within a certain timeframe.
Failing to do this will result in a contract not being performed, and likely a breach of contract, too.
But contract performance isn’t just about what parties have agreed to do. It’s also about what they’ve agreed not to do.
For example, a commercial contract might include terms that prohibit certain information from being shared. Similarly, some employment contracts say that their employees can’t moonlight, which essentially means having a second job.
Why is contract performance important?
Contract performance is important because it makes sure that all parties receive what they originally expected from a contract, and that the partnership has run smoothly.
By doing this, contract performance also releases the parties from the contract, by discharging it. This is called discharge of contract by performance, and it basically means that the contract has ended because all of the parties’ contractual obligations are complete.
Contract performance also matters because failing to fulfil your contractual duties can land you in legal trouble. Let’s explore the consequences of not performing your duties under a contract in a bit more detail now.
What happens if you fail to perform your contractual obligations?
1. Risk of legal action
Not fulfilling your contractual obligations can have serious legal consequences.
Failing to perform your duties under a contract will often result in that contract being breached. This means that the party you’re in the contract with can take legal action against you for breaking the terms of the contract.
This legal action can quickly become expensive to fight, but it can also result in you having to fork out even more money in the form of damages. These damages will be used to compensate for your lack of performance, and any losses the other party has suffered as a result of it.
2. Damage to relationships and reputation
Contract performance is also important when it comes to maintaining relationships with the people you work for and with.
Even if your lack of performance doesn’t result in a contractual dispute, it can still discourage parties from wanting to do business with you again. After all, businesses often rely on the promises made in a contract. If you can’t stick to your part of the deal, they’ll need to look for someone more reliable that can.
Poor contract performance means customers probably won’t renew their contracts, and they’re even less likely to invest in additional products or services from you.
Types of contract performance
Before we explore what you can do to avoid these consequences and perform your contracts successfully, it’s also useful to understand that there are different types of contract performance. This is important because it determines how a contract will be discharged, and what the parties’ legal position will be when it is.
These three types of contract performance are:
- Complete performance
- Substantial performance
- Breach of contract (aka non-performance)
1. Complete performance
Complete contract performance describes a situation where the parties have fulfilled all of their duties under a contract. When one party has performed the contract in full, the other party must do the same.
This is the best type of contract performance because it means that all expectations have been met, and no legal action is required. Instead, the contract ends because the obligations have been met in full already.
2. Substantial performance
Substantial contract performance describes when the main contractual obligations have been performed, but a non-material obligation has not.
Non-material obligations are promises made as part of a contract, but they don’t form the substance of the contract. While it can be annoying if these promises aren’t met, it doesn’t necessarily undermine the purpose of the contract or result in a serious breach.
Instead, the contract can be discharged and any unmet promises can be compensated for.
3. Breach of contract
The final type of contract performance is actually non-performance, also known as a breach of contract. We’ve explained this already, but a breach of contract occurs when parties have failed to fulfil their main contractual obligations.
How to manage your contract performance
To recap: we’ve covered what contract performance means, and the consequences of not performing your contractual obligations.
But for fast-scaling businesses managing lots of contracts, the biggest challenge can be staying on top of your contractual obligations in the first place.
Fortunately, we have some top tips to make contract performance easier in 2024.
1. Centralize your contract storage
It’s hard to fulfil your contractual obligations if you don’t know what they are or where to find them.
This is a common problem for businesses that have their executed contracts scattered across local drives and filing cabinets. Different versions are shared in different places, each with different access controls. This makes it almost impossible to track contracts and their deadlines.
Instead, businesses should opt for a secure contract storage solution that helps them not just store contracts safely, but also find them easily.
Juro’s all-in-one contract automation software is a great example of this, as Juro’s contract repository allows teams to not only centralize where they store their contracts but also search through them in seconds using OCR technology.
2. Capture your contract data accurately
It’s also important to capture the data in your contracts accurately to make sure that you’re performing your contracts correctly. To do this, you’ll want to set up a system that allows you to quickly review important details like:
- Contract type
- Contract owner
- Contract value
- Contract duration
- Obligation due dates
- Contract renewal deadlines
Lots of businesses manually extract this information from contracts and add it to a contract management spreadsheet of some sort. This works, but it can be time-consuming and there’s no guarantee that the data recorded is completely accurate.
It’s often faster, and more reliable, to automate this process. This is possible with most contract management systems as they often pull the data captured in smartfields into a contract dashboard automatically.
Again, Juro is a great example of this. Not only can Juro users customize their contract templates to capture certain data, but they can also create customizable contract dashboards to view this data at scale.
3. Set reminders for contract deadlines
Contract reminders are another great way to ensure contract performance.
Certain contract reminder solutions, including Juro, will allow you to customize who you want to notify and how far in advance you’d like them to receive the notification. Juro users can create contract reminders for any dates within the contract, meaning there’s no risk of your team missing upcoming contract deadlines.
4. Integrate your contract tool with other platforms
Another great way to ensure contract performance is to sync your contracts with your other business tools. That way, the data stored in contracts can be added to other business systems, providing company-wide visibility into contracts and their obligations - if appropriate.
Need help managing contract performance?
Adopting a contract management solution like Juro can provide visibility into your contractual obligations and make managing your contracts simple.
To find out more about how Juro can improve the way you manage contract performance, fill in the form below to receive a personalized demo.