Imagine you have a contract with a social media influencer to promote your new cheek fillers with before-and-after photos to attract customers. Weeks pass, and you still haven’t received the promised content. Could this be a serious enough problem to end the entire agreement? This scenario raises the question of material breach of contract.
Contracts are the backbone of the business. They’re legally binding agreements that outline what everyone is supposed to do. But when one side seriously fails to live up to their promises, it can throw everything into disarray.
What is a Contract?
A contract is a deal between two people or companies that creates a duty to do or not do something. This deal can be in writing or just agreed upon verbally, and the law will ensure that both sides keep their end of the bargain.
What is a Material Breach of Contract?
A material breach of contract is a major failure to perform what was promised in the contract. It breaks the promise in a way that defeats the whole purpose of the deal. It’s so severe that it makes the contract pointless to continue.
Sometimes, it’s clear that this has happened, but other times, it’s hard to tell. When people go to court to decide if a breach is bad enough to end the contract, the judges look at everything that happened, not just one thing. This helps them determine whether the problem is big enough to stop the contract from continuing.
Material Breach vs. Immaterial Breach
Sometimes, when two people or businesses agree, some small things go wrong. For example, a product might be slightly damaged, or a delivery might be a little late. These minor problems are called “immaterial breaches.” They’re like small bumps in the road; they can be fixed easily. They’re not usually a big enough problem to cancel the whole agreement.
But sometimes, things go wrong. This is called a material breach. A material breach is like a big hole in the road that stops you from getting where you need to go. It means that one person or business didn’t follow the agreement, and now the other person or business can’t get what they were promised. When this happens, it’s a big deal and might mean the whole agreement must be canceled.
Was it Intentional?
Usually, whether the person who broke the contract meant to do so isn’t the deciding factor; courts mainly look at the impact of their actions. However, if the breach was clearly deliberate or in bad faith, that can strengthen the case for a material breach.
How Do I Know if a Material Breach Has Occurred?
There’s no simple checklist for determining if a material breach has occurred. Courts analyze a range of factors, including:
- Extent of Deprivation: Did the breach prevent the other party from receiving the main benefit they expected? For instance, if a company hired someone for promotional shots but only got generic beauty content, they wouldn’t get the desired outcome.
- Possibility of Cure: Can the breach be fixed, or has it done permanent damage to the purpose of the contract?
- Sufficiency of Damages: Can money alone make up for the harm caused, or is the damage too significant?
- Proportion of Performance: Was a significant part of the contract already done with just a failure at the end, or did the problem happen at the very beginning?
- Contractual Stipulations: Sometimes, a contract specifically defines what kinds of failures will be considered a material breach.
Examples of Material Breach in Commercial Settings
Let’s illustrate the concept with a few examples common in business and commercial litigation:
- Software Nightmare: A company buys customized software, but what they receive is buggy and barely works, failing to meet its intended purpose.
- The Disappearing Contractor: A homeowner hires a contractor to remodel their kitchen. The contractor takes a deposit and then never finishes the work, leaving the kitchen in disrepair.
- Suppliers Gone Bad: A business relies on receiving supplies on time. Their supplier repeatedly delivers late or sends the wrong items, constantly causing disruptions.
It’s important to remember that every situation is unique. If you’re facing a potential material breach of contract that’s hurting your business, consulting with experienced business lawyers is a wise move.
Consequences of a Material Breach
When a court finds that a material breach of contract has occurred, there are serious implications for both parties involved. Here’s a breakdown of the typical outcomes:
- Termination of the Contract: The party who kept their side of the bargain is generally released from further obligations under the contract. The material breach cancels out their responsibility to keep performing.
- Right to Sue for Damages: The goal of damages (money awarded by the court) is to make up for the losses caused by the breach. Think of it as putting the injured party back in the financial position they would have been in if the contract had been properly followed. Damages can cover things like lost profits, expenses incurred to fix the problem, and other types of harm.
- Specific Performance (Rare): In some cases, a court may order the breaching party to actually do what they originally promised. This is less common than awarding money, but it might happen when money alone wouldn’t truly fix the damage caused by the breach.
Protecting Your Business
No business owner wants to face a serious material breach of contract. Here are proactive steps you can take to reduce the risk:
- Careful Contract Drafting: Work with an experienced attorney when creating contracts. Having clear language, including a clause that specifically spells out what situations would be considered a material breach, can help prevent disputes later on.
- Document Everything: Keep detailed records of how you’ve followed the contract as well as any potential failures by the other side. Good documentation is crucial if a problem does arise.
- Early Communication: Don’t ignore issues; hope they’ll go away. Sometimes, addressing a minor breach quickly can prevent things from turning into a full-blown material breach.
Legal Assistance for Material Breach
Understanding the concept of material breach of contract is essential in the business world. Not every contract issue is a deal-breaker, but sometimes, the breach is so severe that continuing makes no sense.
If you think a material breach of contract is harming your business, don’t delay in seeking legal advice. Experienced commercial litigation attorneys can assess your specific situation, break down your options, and fight to protect your business interests.
Roquemore Skierski PLLC has a team of experienced commercial litigation attorneys who can assist you in case of a material breach of contract. Get legal assistance today!
