Moving On from a Material Contract Breach
March 28, 2016
A contract breach occurs when one of the parties fails to fulfill its obligations under the agreement. However, not all contract breaches are created equal. A “material” breach is so significant that it reaches the core of the agreement and negatively impacts its entire outcome. In contrast, a “non-material” breach often involves less important details.
The distinction between a material and non-material contract breach impacts the legal recourse available to a Monmouth County business. After a material breach, the aggrieved party does not need to perform its part of the contract.
What types of contract breaches are considered material?
In some cases, a material breach will be obvious. For instance, if a band is hired to perform at an event on a specific date and fails to show up without a valid excuse, the breach is likely material.
In other situations, the distinction is far less clear, and the parties should consult with a Monmouth County business lawyer to determine the type of breach and the available remedies. There are several factors to consider when determining whether a contract breach is material, including:
| How far along are the parties in completing their obligations under the contract? A court is more likely to find a non-material breach in the later stages of an agreement. |
| How extensive is the failure?The court will evaluate the losses suffered by the non-breaching party to determine if they impact the heart of the bargain. If so, it will generally find a material breach. |
| What was the intent of the parties? If the court finds that the breaching party acted unfairly or in bad faith, it is more likely to characterize the breach as material. |
| How easy is it to rectify the breach? If the problem could be remedied using reasonable effort and expense, the court is more likely to find a minor breach. |
| How will the breaching party be impacted if the other party is not obligated to perform? Even though the breaching party may be responsible for the problem, the court will still evaluate the severity of the impact (e.g., forfeiture) if the non-breaching party’s performance is excused. |
| Does the contract address breaches?In some case, the terms of the contract specify what constitutes a material breach. The court will look to those provisions to make its determination. |
What recourse is available for a material breach?
The type of breach will impact the legal remedies available to the non-breaching party. If the breach is material, the aggrieved party can:
| File a lawsuit to recover damages and continue the contract, or |
| File a lawsuit to recover damages and cancel its performance under the contract |
If the contract breach is minor, the non-breaching party may only sue to recover damages.
