While most businesses take good care to abide by the contractual agreements that were approved at the outset a given deal, sometimes, contracts are broken. When they are, it can result in stress, anxiety, reputation damage, and significant revenue losses. In the interest of your bottom line, you may wish to pursue litigation for breach of contract — and if you do, your case will revolve heavily around proving what’s known as material breach.
Requirements for Breach of Contract
For any contractual violation to be legally perceived as an official breach of contract, there are three prerequisite requirements:
- A contract exists, period.
- There must be material breach.
- That breach must have resulted in damages.
The first and third requirements are straightforward and self-explanatory enough. It’s the second provision — demonstrating the existence of material breach — that poses the greatest challenge.
What Makes a Breach Material
For a contractual breach to be considered material, that breach must have impacted the contract in a considerable, damaging way. (Anything short of a material breach is considered to be immaterial — that is to say, trivial — and generally does not lead to any sort of financial restitution because it is not sufficiently damaging.) If you think that sounds like an awfully vague definition, you’d be correct. The only requirement of material breach approaching hard-line is that the non-breaching party did not receive the full benefits of the contract’s terms, had it been properly adhered to.
The truth is, the line between material and immaterial can be blurry. Yes, a material breach has to be somehow “major,” or “significant” — but what makes a contract violation major or significant in the first place?
Proving a Breach is Material
While there is no cut-and-dried set of guidelines for what makes a breach material or not, there are ways to help demonstrate that a breach was in fact material:
- There’s no quick fix. Imagine your business receives a shipment of jeans. Upon inspection, the jeans are all missing a visual design that was supposed to be printed on the thighs. This might seem major, but legally speaking, it probably isn’t. Why? The designs could simply be printed back on; and even if they aren’t, they’re still perfectly functional, wearable pants.
- The breaching party is unreliable. If the breaching party seems to have genuine good intentions, it will be obvious. Did they put up collateral? Are they financially robust? Are they making an effort to fix the problem? If so, you’re probably out of luck. However, if they seem unlikely to fix the problem — they aren’t addressing it, or they’re in dire financial straits — proving material breach becomes a little easier.
- There’s nothing to make up for it. If the project is nearing completion when a breach occurs, two things are happening: 1.) the breaching party now has much more to lose than they did in the beginning, when less time and money had been invested; and 2.) the breaching party did most of their work correctly — there’s just the one small aspect that’s causing problems. If the breaching party erred early on, and did little or nothing else correctly, you are far more likely to be able to prove that the breach was material.
Whether or not a breach is material ultimately comes down to the discretion of the particular court hearing the case — but having an experienced breach of contract attorney on your side can help dramatically. Contact Berkowitz Klein today.