Legal Research & Analysis Series

LEGAL RESEARCH & ANALYSIS SERIES

UNDERSTANDING CONTRACT PERFORMANCE

PREVENTION OF PERFORMANCE

REFUSAL OF PAYMENTS AND OTHER ACTS THAT CAN PREVENT, HINDER, OR OBSTRUCT CONTRACTUAL PERFORMANCE

A Party Should Not Assume It Can Block the Other Side’s Performance—and Then Rely on the Resulting Nonperformance as Though the Obstruction Never Happened

PERFORMANCE IS NOT ALWAYS A ONE-SIDED OBLIGATION

Contracts are often described in simple terms:

One party promises to do something.

The other party promises to do something in return.

But actual performance can require cooperation.

A tenant may need a landlord to provide an authorized method for paying rent.

A contractor may need access to a job site.

A purchaser may need documents from a seller.

A borrower may need payoff information from a lender.

An employee may need authorization before completing a required task.

A service provider may need specifications, approvals, credentials, or access before work can proceed.

When one party controls something necessary for the other party’s performance, the legal analysis can become substantially more complicated if that cooperation is withheld.

Contract law in multiple jurisdictions recognizes some form of what is commonly called the prevention doctrine or prevention-of-performance principle: a contracting party may face consequences when its own wrongful conduct prevents or materially hinders the other party’s performance or prevents a contractual condition from occurring. The exact formulation, required intent, causation standard, and remedy vary by governing law. 

THE CORE QUESTION

The issue is not merely:

DID THE OTHER PARTY FAIL TO PERFORM?

A deeper analysis asks:

WAS THAT PARTY READY, WILLING, AND ABLE TO PERFORM?

WHAT DID THE CONTRACT REQUIRE?

DID THE OTHER SIDE CONTROL SOMETHING NECESSARY FOR PERFORMANCE?

WAS PERFORMANCE TENDERED OR ATTEMPTED?

WAS THAT PERFORMANCE REFUSED?

WAS ACCESS BLOCKED?

WAS A CONDITION PREVENTED FROM OCCURRING?

DID THE OBSTRUCTION ACTUALLY CAUSE OR MATERIALLY CONTRIBUTE TO THE NONPERFORMANCE?

That distinction can become critical.

THE PREVENTION PRINCIPLE

The prevention doctrine is not one universal statute with identical wording throughout the United States.

It is a contract-law doctrine whose application depends upon the controlling jurisdiction.

Courts have described the concept in slightly different ways, but the recurring principle is that a party may not be able to rely upon the failure of performance or failure of a condition when that party wrongfully caused or substantially contributed to the failure. The D.C. Circuit, for example, has described prevention as potentially applying where a promisor wrongfully prevents a contractual condition from occurring, while the Federal Circuit has recognized prevention as a generally accepted contract principle appearing across several federal circuits. 

Virginia’s Supreme Court has likewise discussed the prevention doctrine as potentially operating both defensively—preventing the obstructing party from recovering for nonperformance it caused—and affirmatively in appropriate circumstances involving wrongful prevention of a condition. Importantly, that court emphasized that the allegedly preventive conduct must satisfy the requirements imposed by governing law; merely making performance difficult is not automatically enough. 

PREVENTION OF PERFORMANCE IS BIGGER THAN REFUSING MONEY

Payment refusal is one important example.

But prevention can potentially involve many forms of conduct.

Examples may include:

refusing payment;

disabling a payment portal;

refusing to provide payment instructions;

refusing required access;

withholding documents;

withholding approval;

preventing an inspection;

failing to provide specifications;

refusing to schedule required work;

blocking entry;

refusing to execute documents needed for closing;

withholding information necessary to calculate an obligation;

interfering with financing;

preventing satisfaction of a condition precedent;

or otherwise controlling and withholding something necessary for the other party to perform.

Whether any particular act legally qualifies as prevention depends upon the contract, governing law, causation, justification, and evidence.

REFUSAL OF PAYMENT:

ONE OF THE CLEAREST PRACTICAL EXAMPLES

Suppose a contract requires:

PARTY A MUST PAY PARTY B $1,500 ON SEPTEMBER 1.

Party A appears on September 1 with the required payment.

Party B refuses to accept it.

Party B later claims:

“PARTY A FAILED TO PAY.”

That is no longer simply a payment-default case.

A court may need to distinguish:

FAILURE TO PAY

from

PAYMENT TENDERED BUT REFUSED.

The difference can materially affect legal analysis.

TENDER MATTERS

“Payment” and “tender” are not always legally identical.

A tender generally concerns an offer or attempt to perform an obligation in the manner required by the applicable law or contract.

A valid tender can be highly technical.

Questions may include:

Was the correct amount offered?

Was it timely?

Was the correct recipient approached?

Was the payment method authorized?

Were improper conditions attached?

Was the person actually ready and able to complete payment?

Was the tender documented?

What does governing law provide regarding the effect of refusal?

The answers vary by jurisdiction and type of obligation.

REFUSAL DOES NOT AUTOMATICALLY ERASE EVERY OBLIGATION

This qualification is extremely important.

A refused payment does not necessarily mean:

the debt disappeared;

the contract ended;

the money became the refusing party’s property;

all future obligations were excused;

or the tendering party automatically wins a lawsuit.

The legal consequence of tender and refusal depends upon the governing substantive law.

A refused tender may instead affect particular issues such as:

default;

interest;

late charges;

forfeiture;

damages;

termination rights;

eviction rights;

specific performance;

or whether one party may characterize the other as having simply failed to perform.

The exact effect must be researched under the applicable jurisdiction.

THE EVIDENTIARY DIFFERENCE

Compare two records.

RECORD A

Tenant:

“I tried to pay.”

Landlord:

“No, you did not.”

No receipt.

No email.

No transaction record.

No witness.

No screenshot.

No written payment instructions.

Now compare:

RECORD B

September 1 — payment initiated.

September 1 — bank confirms available funds.

September 1 — payment platform identifies landlord as recipient.

September 1 — landlord rejects transaction.

September 1 — tenant emails: “The rent payment was returned. Please provide another authorized method.”

September 2 — landlord responds: “We will not accept payment.”

September 2 — tenant preserves funds.

Those cases may present very different evidentiary records.

PREVENTION SHOULD BE DOCUMENTED AS AN EVENT

When performance is prevented, document:

WHAT YOU WERE REQUIRED TO DO

WHEN PERFORMANCE WAS DUE

WHAT YOU DID TO PERFORM

WHAT YOU NEEDED FROM THE OTHER PARTY

WHAT THE OTHER PARTY DID OR REFUSED TO DO

WHEN THE OBSTRUCTION OCCURRED

HOW IT AFFECTED PERFORMANCE

WHETHER AN ALTERNATIVE METHOD EXISTED

WHAT YOU DID AFTER THE OBSTRUCTION

That creates a causation record.

CAUSATION IS CENTRAL

The existence of obstruction alone may not resolve the dispute.

Suppose a landlord temporarily disables an online portal.

But the lease also expressly permits payment:

by certified check;

at the management office;

or through another available portal.

A tenant who does nothing further may face a different analysis than one who immediately attempts every authorized alternative.

The key question becomes:

DID THE OTHER PARTY ACTUALLY PREVENT PERFORMANCE?

rather than merely:

DID THE OTHER PARTY MAKE PERFORMANCE LESS CONVENIENT?

The distinction between prevention, substantial hindrance, inconvenience, and independent inability can be decisive under governing law. Federal cases discussing prevention emphasize that the alleged obstruction must meaningfully contribute to the nonoccurrence or nonperformance at issue. 

THE PARTY CLAIMING PREVENTION SHOULD STILL ACT REASONABLY

A prevention argument becomes considerably stronger when the prevented party can show:

readiness;

ability;

timeliness;

good-faith effort;

reasonable alternatives;

continued communication;

and preservation of the means of performance.

For payment disputes, that might mean:

keeping the funds available;

attempting the authorized payment method;

requesting replacement instructions;

notifying the receiving party of the refusal;

preserving transaction records;

and attempting reasonable alternatives permitted by the agreement.

PREVENTION AND CONDITIONS PRECEDENT

Some contractual duties arise only if another event first occurs.

That earlier event may be called a:

CONDITION PRECEDENT.

Example:

A commission becomes payable only if a sale closes.

A final payment becomes due only after approval.

An obligation arises only after delivery of specified documentation.

Ordinarily, failure of the condition may mean the dependent obligation never matures.

But prevention doctrine becomes relevant when the party seeking to rely upon the failed condition is accused of wrongfully causing that condition not to occur. Courts have repeatedly analyzed prevention in this condition-precedent setting. 

THE STRATEGIC QUESTION BECOMES:

WHO CAUSED THE CONDITION TO FAIL?

Suppose:

Seller owes Broker a commission if closing occurs.

Seller deliberately prevents closing.

Seller then argues:

“NO CLOSING, NO COMMISSION.”

That is precisely the type of structure in which prevention doctrine may become relevant, although the actual result turns upon the contract and governing law. Virginia’s Supreme Court examined that type of issue in Rastek Construction & Development Corp. v. General Land Commercial Real Estate Co. and emphasized that the doctrine has defined limits rather than operating automatically whenever one side claims interference. 

PREVENTION AND GOOD FAITH

Prevention analysis can overlap with another contract concept:

THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING.

The relationship between the two doctrines varies by jurisdiction.

North Carolina appellate courts continue to adjudicate disputes involving the implied covenant of good faith and fair dealing. The North Carolina Supreme Court’s 2024 decision in Canteen v. Charlotte Metro Credit Union, for example, addressed whether exercising a contractual change-of-terms provision violated that implied covenant, while earlier North Carolina appellate authority has likewise addressed good-faith principles in contract disputes. 

The important practical distinction is:

HAVING A CONTRACTUAL RIGHT

does not necessarily answer

HOW THAT RIGHT MAY LAWFULLY BE EXERCISED.

But the scope of any implied covenant and whether it supplies an independent claim depend on the jurisdiction.

PREVENTION IS NOT THE SAME AS BAD FAITH IN EVERY CASE

These concepts may overlap.

They should not automatically be treated as identical.

A prevention claim may focus upon:

causation;

contractual conditions;

performance;

and wrongful obstruction.

A good-faith claim may focus upon:

the exercise of contractual discretion;

conduct inconsistent with contractual purposes;

or other jurisdiction-specific standards.

Always identify the actual doctrine being asserted.

EXAMPLE:

REFUSING RENT AND THEN ALLEGING NONPAYMENT

Suppose a lease requires monthly rent.

The tenant timely offers the full amount through an authorized method.

The landlord refuses it.

The tenant retains documentation showing:

the amount;

date;

method;

recipient;

available funds;

refusal;

and subsequent communications.

The landlord later files an action alleging:

FAILURE TO PAY RENT.

The dispute should not be analyzed merely as:

“WAS RENT RECEIVED?”

The more complete questions include:

Was rent properly tendered?

Was tender timely?

Did the landlord have a lawful basis for refusing it?

Was an alternative method available?

Did the tenant remain ready and able to perform?

What legal consequence does refusal have under the governing landlord-tenant law?

Was the alleged default caused by the tenant—or by the refusal?

Those are separate questions.

EXAMPLE:

DISABLING THE PAYMENT PORTAL

Assume the lease requires electronic payment through the landlord’s portal.

The landlord disables the tenant’s access before rent is due.

No alternative method is provided.

The tenant immediately requests restored access.

The landlord refuses.

The landlord later adds late fees.

This may create issues concerning:

contract performance;

tender;

prevention;

good faith;

damages;

and the enforceability of consequences attributed to nonpayment.

But if the lease clearly provides three other authorized payment methods that remained available, the analysis may change substantially.

EXAMPLE:

WITHHOLDING A PAYOFF AMOUNT

A contract allows a party to cure or satisfy an obligation by paying a calculated amount.

The party requests the payoff.

The counterparty controls the calculation.

The counterparty refuses to provide it.

The deadline passes.

The counterparty then claims:

“YOU FAILED TO PAY THE REQUIRED AMOUNT.”

This presents a prevention question because the party accused of nonperformance may contend that essential information necessary for performance was withheld.

EXAMPLE:

REFUSING ACCESS

A contractor agrees to complete work by October 1.

The property owner refuses to allow the contractor onto the property for the final three weeks of September.

October 1 arrives.

The owner argues:

“YOU MISSED THE COMPLETION DEADLINE.”

The contractor may respond:

“YOUR OWN CONDUCT PREVENTED TIMELY PERFORMANCE.”

Again, causation becomes central.

EXAMPLE:

WITHHOLDING REQUIRED APPROVAL

A service contract requires Party A to obtain Party B’s approval before proceeding to Phase II.

Party A timely submits everything required.

Party B simply refuses to approve or reject the submission.

The deadline expires.

Party B then claims Party A failed to complete Phase II.

That situation may implicate prevention, contractual discretion, good faith, waiver, or other doctrines depending upon the agreement and jurisdiction.

OTHER FORMS OF PREVENTION

Potential prevention scenarios include:

PAYMENT PREVENTION

Refusing an authorized payment without providing another method.

ACCESS PREVENTION

Blocking entry necessary to perform work.

INFORMATION PREVENTION

Withholding figures, specifications, passwords, instructions, or records required for performance.

APPROVAL PREVENTION

Refusing or indefinitely delaying required approval.

DOCUMENT PREVENTION

Refusing to execute or deliver documents necessary to complete a transaction.

INSPECTION PREVENTION

Preventing an inspection required before payment or completion.

COMMUNICATION PREVENTION

Directing that there be no communication while simultaneously requiring coordination.

SCHEDULING PREVENTION

Refusing to schedule an event that must occur before performance can continue.

CONDITION PREVENTION

Taking action that prevents a contractual condition precedent from occurring.

TECHNOLOGY PREVENTION

Disabling the only authorized portal, account, credential, or electronic system required for performance.

NOT EVERY REFUSAL IS WRONGFUL

This is critical.

A party may sometimes possess a lawful contractual or statutory right to refuse performance.

Examples could include:

payment in an unauthorized form;

payment of less than the required amount;

payment made after valid termination;

failure to satisfy a prerequisite;

unsafe work;

nonconforming goods;

missing documentation;

or another material contractual deficiency.

Prevention doctrine does not automatically convert every refusal into wrongful conduct.

Virginia’s Supreme Court has expressly emphasized that prevention requires conduct that satisfies the governing standard of wrongfulness; lawful exercise of a contractual right is not automatically prevention. 

READ THE CONTRACT FIRST

Before alleging prevention, identify:

the precise duty;

the deadline;

the method of performance;

the conditions precedent;

the cooperation required;

the discretionary rights;

the rejection rights;

the cure provisions;

and the remedies.

Many prevention disputes can be misunderstood because one side assumes an obligation that the contract never actually imposed.

THEN READ THE GOVERNING LAW

The next question is:

WHICH JURISDICTION’S LAW CONTROLS?

A contract may include:

a choice-of-law clause;

forum-selection clause;

arbitration provision;

or specialized statutory framework.

State law can materially differ regarding:

prevention;

tender;

conditions precedent;

waiver;

good faith;

damages;

specific performance;

and excuse of performance.

PREVENTION CAN OPERATE AS A DEFENSE

Imagine Party A sues Party B for nonperformance.

Party B responds:

“I DID NOT PERFORM BECAUSE PARTY A PREVENTED ME FROM DOING SO.”

That is a defensive use.

Federal appellate authority has described prevention as potentially excusing performance where the counterparty hinders, prevents, or makes performance impossible, subject to the governing law and contract. 

PREVENTION CAN ALSO AFFECT AN AFFIRMATIVE CLAIM

Depending upon jurisdiction, the obstructed party may argue that the preventing conduct itself constituted:

breach of contract;

breach of an implied contractual obligation;

breach of the covenant of good faith;

or another recognized cause of action.

But those are separate claims requiring separate elements.

Do not assume that proving prevention automatically proves damages.

DAMAGES STILL REQUIRE PROOF

Even if prevention is established, a claimant may still need to prove:

causation;

actual loss;

foreseeability;

reasonable certainty;

mitigation;

and availability of the requested remedy.

The prevention doctrine is not a blank check.

MITIGATION MAY STILL MATTER

Suppose performance is temporarily blocked.

Could the party reasonably have:

used another permitted method;

requested access;

sought clarification;

cured a defect;

rescheduled;

or reduced the resulting loss?

The duty to mitigate and the prevention doctrine are different concepts, but they can interact in damages analysis.

DOCUMENT READINESS AND ABILITY TO PERFORM

One of the strongest prevention records establishes:

“BUT FOR THE OBSTRUCTION, I COULD AND WOULD HAVE PERFORMED.”

For payment:

show available funds.

For construction:

show labor, materials, scheduling, and access requests.

For delivery:

show the goods were ready.

For closing:

show financing and required documents.

For repairs:

show contractor availability and requested entry.

For inspection:

show attempts to schedule.

Readiness matters.

A PREVENTION TIMELINE

Create a chronological record.

CONTRACT REQUIREMENT

September 1 — $1,500 payment due.

PREPARATION

August 30 — funds available.

ATTEMPT

September 1, 9:05 a.m. — authorized transfer initiated.

OBSTRUCTION

September 1, 9:06 a.m. — recipient rejects transfer.

NOTICE

September 1, 9:15 a.m. — written notice sent asking for alternative method.

CONTINUED READINESS

September 1–5 — funds remain available.

SECOND ATTEMPT

September 2 — certified check offered.

SECOND REFUSAL

September 2 — landlord declines delivery.

LATER CLAIM

September 6 — landlord alleges nonpayment.

Now the dispute can be analyzed event by event.

PRESERVE ORIGINAL EVIDENCE

Useful evidence may include:

contracts;

leases;

bank records;

payment-platform confirmations;

returned payments;

emails;

texts;

portal screenshots;

access logs;

letters;

certified-mail receipts;

delivery records;

calendar entries;

witness statements;

account ledgers;

audio recordings where lawfully made;

video;

and sworn testimony.

Do not rely solely upon memory.

THE PREVENTION MATRIX

For every alleged obstruction, analyze:

Required performance:
What was supposed to happen?

Deadline:
When?

Required cooperation:
What did the other party control?

Attempted performance:
What did the performing party actually do?

Obstructive act:
What was refused, blocked, withheld, or delayed?

Authority:
Did the obstructing party have a contractual or legal right to do it?

Causation:
Would performance have occurred without the obstruction?

Alternative performance:
Was another reasonable method available?

Notice:
Was the obstruction reported promptly?

Continuing ability:
Did the party remain ready and able to perform?

Resulting harm:
What consequence followed?

REQUESTS FOR ADMISSION CAN NARROW PREVENTION DISPUTES

In litigation, strategically drafted Requests for Admission might address propositions such as:

Admit that the payment was tendered on September 1.

Admit that the payment amount equaled the amount then demanded.

Admit that the recipient account was controlled by Plaintiff.

Admit that Plaintiff rejected the payment.

Admit that Plaintiff did not provide an alternative payment method before September 5.

Admit that Defendant requested instructions for completing payment.

Admit that Plaintiff later alleged Defendant failed to pay.

If admitted, the factual dispute may narrow substantially.

The legal effect remains for the court to determine.

AFFIDAVITS AND DECLARATIONS CAN EXPLAIN PERFORMANCE

A party claiming prevention may need testimony establishing:

personal knowledge;

readiness;

attempted performance;

communications;

the obstruction;

and resulting inability to complete performance.

A conclusory statement such as:

“THEY PREVENTED ME”

may be far weaker than:

“On September 1 at 9:05 a.m., I attempted to transmit $1,500 through the payment account identified in Section 4 of the lease. At 9:06 a.m., the transaction was rejected. Exhibit A is the contemporaneous transaction confirmation.”

Facts matter.

SUMMARY JUDGMENT MAY TURN ON THE PREVENTION RECORD

At the pleading stage, the parties may simply allege:

“PAYMENT WAS NOT MADE.”

or:

“PAYMENT WAS WRONGFULLY REFUSED.”

At summary judgment, the record may contain:

payment confirmations;

bank statements;

admissions;

emails;

lease provisions;

affidavits;

and ledgers.

The legal analysis then becomes much more precise.

The question may be whether any genuine dispute remains regarding:

tender;

refusal;

authorization;

causation;

or continued ability to perform.

PREVENTION AND RULE 11

Litigation positions concerning performance should be investigated carefully.

A party should be cautious about presenting a categorical statement such as:

“THE OTHER PARTY NEVER ATTEMPTED PERFORMANCE”

if preserved records demonstrate repeated attempts.

Likewise, a party should not accuse the other side of intentional prevention without a factual basis.

The litigation position must remain grounded in the evidence and applicable law.

THE BIGGEST ANALYTICAL MISTAKE

The most common mistake is beginning with the end result:

PAYMENT NOT RECEIVED.

WORK NOT COMPLETED.

CLOSING DID NOT OCCUR.

DOCUMENT NOT FILED.

DEADLINE MISSED.

and stopping there.

The proper analysis asks:

WHY?

If nonperformance occurred because the obligated party simply failed to perform, that is one case.

If nonperformance occurred because the other party prevented performance, that can be a fundamentally different case.

FAILURE AND PREVENTION ARE NOT SYNONYMS

FAILURE TO PERFORM

means the required performance did not occur.

PREVENTION OF PERFORMANCE

asks whether the other party’s conduct caused, substantially hindered, or legally excused that failure under governing law.

The result may look identical.

The causation may be completely different.

THE DEEPER MEANING

Contract law is not solely concerned with whether the final box was checked.

It also examines:

what each party promised;

what conditions existed;

who controlled them;

whether cooperation was required;

what each party actually did;

and why performance failed.

That is why obstruction matters.

THE BOTTOM LINE

Prevention of performance is the legal idea that a contracting party may face consequences when its own wrongful conduct prevents or materially hinders the other party’s contractual performance or causes a required condition to fail. Courts do not apply the doctrine identically, and the contract and governing law remain essential. 

Refusal of payment is one of the clearest practical situations in which the issue can arise—but it is only one example.

Prevention can also involve:

blocking access;

withholding information;

refusing approvals;

disabling payment systems;

preventing inspections;

withholding documents;

refusing scheduling;

interfering with conditions precedent;

or otherwise controlling something necessary for performance.

The strongest analysis does not simply ask:

WAS THE CONTRACT PERFORMED?

It asks:

WHAT WAS REQUIRED?

WAS PERFORMANCE ATTEMPTED?

WAS THE PARTY READY AND ABLE?

WHAT PREVENTED COMPLETION?

WHO CONTROLLED THE OBSTACLE?

WAS THE OBSTRUCTION JUSTIFIED?

DID IT ACTUALLY CAUSE THE NONPERFORMANCE?

AND WHAT DOES THE GOVERNING LAW SAY THE CONSEQUENCE SHOULD BE?

Because a party who creates the obstacle may not always be able to point to the resulting failure as though the obstacle never existed.

GREENSBORO ENTREPRENEUR

LEGAL RESEARCH & ANALYSIS SERIES

PREVENTION OF PERFORMANCE

REFUSAL OF PAYMENTS AND OTHER PREVENTIONS

Performance cannot be analyzed without examining what caused performance to fail.

Research. Understand. Document. Analyze.

EDUCATIONAL & LEGAL RESEARCH NOTICE

This newsletter is provided solely for educational, informational, and legal-research purposes. It is not legal advice and does not create an attorney-client relationship.

The prevention doctrine, tender rules, conditions precedent, implied covenants, waiver, excuse of performance, damages, mitigation, and the legal effect of refusing payment vary materially among jurisdictions. Courts may use different terminology and may impose different requirements concerning wrongfulness, intent, substantial hindrance, causation, readiness and ability to perform, contractual allocation of risk, and available remedies. Federal appellate decisions demonstrate that prevention is a recognized contract concept, but the applicable state substantive law generally controls ordinary contract disputes. 

North Carolina courts separately continue to address contract doctrines involving good faith and fair dealing, but those doctrines should not automatically be treated as identical to the prevention doctrine. 

Before asserting that contractual performance was prevented—or relying upon another party’s nonperformance—research the actual contract, applicable statutes, controlling appellate decisions, local law, specialized landlord-tenant or commercial rules, and the precise facts surrounding the attempted performance.