What Is Material Breach?
A material breach is a breach (failure to comply with the terms of the contract) that is so fundamental to the purpose of the contract, that it renders the agreement irreparably broken, and breaks the contract completely. A material breach will entitle the party who has suffered the breach to suspend their contractual obligations to the other party, as well as granting them eligibility to pursue damages caused by the breach.
What is the difference between a material and non-material breach?
There is a significant difference between a failure to fulfil small detail of the contract, versus a total failure to perform a key aspect of the agreement. This is at the key of material breach – it is a violation of the contract that strikes so thoroughly of the substance of the contract itself, that it renders the contract irreparably broken.
What does a material breach look like?
Let us say, for example, there is a contract to construct a tennis court. The agreement may specify lots of different things, including the length of the court, the colours to be used, and the amount of doors that will be installed. The builder will agree to construct the court according to the specifications of the contract, and in exchange, the property owner will agree to pay a predetermined sum of money. If the court is never built at all, this is an example of a material breach. The nature of the contract has not been fulfilled. However, if the court is constructed, and the builder only includes one door instead of two, this will likely not be considered a material breach. After all, the property owner still has a functional tennis court. The damage that is caused by not having two doors can be remedied.
What does material breach mean for the parties?
In the case of a material breach, the party who has not had their part of the contract fulfilled has a number of options available to them, with the most important one being that they can chose not to perform their part of the contract. This essentially means the contract is “voided” – the obligations one party had to another have been made redundant as a result of the other parties’ conduct.
A material breach must be a breach that strikes at the very heart and function of the contract.
A variety of equitable remedies are available to parties who have suffered a material breach. These include injunctions and contract recissions.