What Is a Material Breach of Contract?

 Posted on October 26, 2022 in Business Law

Businesses rely on contracts to protect their interests and establish clear expectations with others they work with. A breach of contract may occur when one party does not hold up their end of the bargain. This can be damaging to a business, and in some cases, business litigation may be required to resolve the issue. However, the steps that may be taken and the remedies that may be available can differ depending on whether a minor breach or material breach occurred. By understanding what constitutes a material breach of contract and working with an attorney to determine their options, business owners can take the correct steps to resolve these matters effectively.

What Constitutes a Material Breach of Contract?

There are two main types of contract breaches: material breaches and minor breaches. A minor breach is one that does not affect the overall performance of the contract. For example, if a business ordered 100 widgets from a supplier but only received 99, that would be considered a minor breach. The business would still be able to use the widgets as intended, and the shortfall could easily be made up by requesting that the supplier provide the missing widget or ordering more widgets.

A material breach, on the other hand, is a much more serious matter. This type of breach affects the core obligations of the contract and can make it impossible for the purpose of the contract to be fulfilled. For example, if a business ordered 100 widgets from a supplier, but the supplier delivered 100 defective widgets, that would be considered a material breach. The widgets would be useless to the business that ordered them, and this would likely cause the business to suffer significant financial losses. 

Multiple factors may affect whether a breach of contract is considered to be a material breach. These may include:

• Whether the non-breaching party received a significant benefit, such as the receipt of some of the goods that were ordered.

• The extent of the obligations that were met by the breaching party.

• The extent of the hardship suffered by the non-breaching party.

• Whether the breaching party engaged in negligent behavior or willfully failed to meet their obligations.

• Whether sufficient compensation can be provided for the damages suffered by the non-breaching party.

• Whether the breaching party is likely to be able to fulfill any obligations that have not been met.

Examples of Material Breaches of Contract 

There are many different ways that a party can commit a material breach of contract. Some common examples include: 

• Failing to meet deadlines

• Not providing the agreed-upon services or products 

• Providing services or products that do not meet the specified quality standards 

• Failing to pay invoices on time 

These types of violations may be considered material breaches if they cause the non-breaching party to suffer significant losses due to the inability to complete work or meet their obligations to others. Business owners who are unsure about whether a contract violation constitutes a material breach can consult with an experienced attorney who can review their case and provide guidance on whether they may be able to recover damages through business litigation. 

Contact Our Fort Lauderdale Contract Litigation Lawyer

A material breach of contract is a serious matter that can have far-reaching consequences for businesses. Following a material breach, it is important to seek legal counsel right away so that you can understand your options and take action accordingly. If you need to address a breach of contract issue, The Elliot Legal Group, P.A. can provide you with dedicated legal help. Contact our Sunrise business litigation attorney at 754-332-2101 to set up a consultation today.

Sources:

https://www.investopedia.com/terms/b/breach-of-contract.asp

http://jec.unm.edu/education/online-training/contract-law-tutorial/breach-of-contract