A breach of contract occurs when one party fails to perform their duties as specified in a contract. A contract may be breached by one or both parties. A breach of contract can result in legal consequences for the breaching party. A breach of contract may either be material or non-material depending on the nature of the breach.
What is the difference between a material versus a non-material contract breach?
A material breach is a breach that reaches to the heart of the contract’s subject matter and negatively affects the outcome of the agreement. The essential requirement for a material breach is that the non-breaching party did not receive the “substantial benefit” of the bargain.
A material or “major” breach usually has the effect of defeating the parties’ intentions in the contract. If the breach seems unfair or has gone beyond the terms of the contract, it is usually a material breach.
In contrast, a non-material or “minor” breach is a failure to perform a duty that only involves minor details which do not affect the whole outcome of the contract. It usually considered to be less serious than a material breach and is often unrelated to the subject matter of the agreement.
What is an example of a material breach?
An example of a material breach might be in an electrical contract, where an owner of the home has contracted to pay an electrician to install high-grade wires for safety purposes. Instead, the electrician installs low-quality wires which do not work as well and cause damage to the walls. This would be considered a material breach since the intent of the contract (safety) has been disregarded.
Other examples of material breaches can include an improper delivery of merchandise in terms of quantities or qualities, diminished value in a product, or a change in price.
An example of a non-material breach might be if the home owner contracts for black colored wires but the plumber installs red colored wires, which perform just as well and are not visible after installation as they are sealed behind the wall. This would be considered a breach, but would be non-material because the overall outcome of the contract is the same.
What are the legal consequences of material and non-material contract breaches?
In a material breach, the non-breaching party:
May sue immediately for breach of contract and recover any damages
Will be excused from performing their part of the contract.
In the first example above, the home owner may sue the electrician immediately and will be excused from paying for the incorrect wires. They will likely be able to recover for any damages resulting from the inferior wires, and possibly the cost to replace them in accordance with contract specifications.
With a non-material breach, the non-breaching party:
May sue for any damages caused by the breach
Must still perform their part of the contract
In the second example, even though the wires were colored differently, they still performed with the same quality and must pay the electrician under the contract terms. The home owner can only sue the electrician if they can prove that the installation of the wrong colored wires resulted in some form of economic loss.
Do I need a lawyer for a breach of contract issue?
Regardless of whether the breach is considered to be material or non-material, it is in your best interests to seek the advice of a contracts lawyer. Material breaches will usually give rise to a viable cause of action in a court of law. Non-material breaches are also important because there may be damages involved that need to be remedied in court. An experienced lawyer can provide much guidance in presenting your arguments or defenses.