Material Breach of Contract
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What Is a Contract?
A contract is a legally binding and enforceable contract between two or more parties. Each party to the contract makes a promise to do something or refrain from doing something in exchange for the other party’s promise.
How Does a Breach of Contract Occur?
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 all parties. Legal consequences may result for the breaching party. A breach may either be material or non-material depending on the nature of the breach.
What Is a Material Contract Breach?
A material breach is a party’s failure to perform a major part of the contract. The breach is substantial and prevents the contract from being completed or defeats the purpose of the contract. A non-breaching party is thus no longer obligated to finish their performance under the contract.
What Is a Non-Material Breach?
A non-material breach, or minor breach, occurs when a party fails to complete a less serious part of a contract. The contract can still be completed in the event of a non-material breach. Thus, the non-breaching party is still obligated to complete their performance.
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.
What Is an Example of a Non-Material Breach?
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.
How Can I Determine If a Material Breach Occurred?To determine whether a breach is material or not, one must look at the extent to which the:
- Non-breaching party is deprived of substantial benefit
- Non-breaching party can be adequately compensated for the breach
- Breaching party’s behavior conforms to the standards of fair dealing and good faith
- Breaching party demonstrates an intent to remedy the failure to fulfill the agreement, including reasonable assurances to complete the agreement
What Are the Legal Consequences of Material and Non-material Contract Breaches?
In a material breach, the non-breaching party:
- May sue immediately and recover any damages
- Will be excused from performing their part of the contract and may even stop their performance as soon as they suspect the breach under anticipatory repudiation, although they can choose to withdraw their repudiation later
- May sue for any damages caused by the breach
- Must still perform their part of the contract
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 business 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. A lawyer can provide much guidance in presenting your arguments or defenses.
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Last Modified: 12-29-2015 12:59 PM PST
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