Jacob & Youngs, a construction company, contracted to build a country residence for Kent. The contract specifically required that all wrought iron pipe used in the plumbing system be "Reading pipe" (manufactured by the Reading Manufacturing Company). However, Jacob & Youngs inadvertently installed pipe manufactured by other companies, including Cohoes pipe, which was of substantially the same quality, appearance, value, and utility as Reading pipe.

The substitution was not discovered until after the house was completed and Jacob & Youngs had been paid most of the contract price. When Kent learned of the pipe substitution, he refused to pay the remaining balance of approximately $3,483. Jacob & Youngs sued for the unpaid balance. The trial court found that the non-Reading pipe was of equal quality and value to Reading pipe, but ruled for Kent because the contract terms were not literally fulfilled.

The substantial performance doctrine allows a party who has substantially performed their contractual obligations to recover under the contract, even if there are minor deviations from the contract terms. The key test is whether the breach is material or immaterial:

• Material breach: A breach that goes to the essence of the contract and defeats the purpose of making the contract. This bars recovery under the contract.
• Immaterial breach: A breach that does not defeat the essential purpose of the contract. The breaching party can still recover the contract price minus damages caused by the breach.

Factors to consider include: the extent of non-performance, whether the breach was willful, the likelihood that the breaching party will cure the breach, and whether the non-breaching party will be adequately compensated by damages.

Judge Benjamin Cardozo, writing for the majority, reasoned that the law should not permit a party to escape payment for work that has been substantially completed according to the contract's essential purposes. The court emphasized that the breach was inadvertent, not willful, and that the substituted pipe was of equal quality, value, and utility to the specified Reading pipe.

Cardozo distinguished between dependent and independent promises, noting that not every breach of contract gives rise to a right to treat the contract as at an end. The court applied a test of materiality, asking whether the breach went to the "essence" of the contract. Since the purpose of the contract was to build a house with quality plumbing, and that purpose was achieved despite the brand substitution, the breach was immaterial.

The court also considered the harsh consequences of the alternative rule, noting that requiring perfect performance would allow parties to escape payment for substantial work over trivial deviations. However, the court made clear that the non-breaching party should be compensated for any actual damages caused by the deviation.

Jacob & Youngs v. Kent established the substantial performance doctrine as a fundamental principle of American contract law. The decision moved away from rigid formalism toward a more flexible approach that considers the practical realities of contract performance, particularly in construction contracts where perfect compliance with every specification may be impossible or economically wasteful.

The case demonstrates the evolution of contract law from strict adherence to contract terms toward a more equitable approach that balances the interests of both parties. It established the material/immaterial breach distinction that courts continue to apply today in determining whether a breach excuses the other party's performance.

The decision is particularly important in construction law, where it prevents property owners from avoiding payment for substantial work over minor deviations. The case also illustrates Judge Cardozo's influential judicial philosophy, which emphasized practical justice over rigid rule application. This case remains essential for understanding modern contract performance doctrine and breach remedies.