Material vs. Non-Material Contract Breaches
As a business owner, you may have contracts in place for clients, vendors, and even employees. Contracts help ensure everyone is aware of their obligations. Each party has things that they must do, and if they fail to do so, it is considered a breach of contract.
When a contract is breached, it means someone does not do something, causing the other parties involved to suffer losses. They do not get their fair share of the deal. There may be lost time, lost money, or lost customers involved.
However, not all breaches of contract are the same. Some are material, while others are non-material. Read on to learn more about what these terms mean.
A material breach is a breach of contract that is major. It is significant enough to ruin a contract and make it so the main purpose of it is not met. The contract is essentially useless.
A non-material breach refers to a minor breach of the contract. A minor obligation was not met, so while there may not be any loss, there could be disappointment. A non-material breach has a minor impact on the overall outcome. The purpose of the contract is still achieved, but something is missing and not all parties may be satisfied.
What is the Difference?
Here’s an example to show you the difference between a material and non-material breach. Let’s say you wanted to purchase a sports car. As options, you would like the vehicle to have a leather interior, a navigation system, and a spoiler. What if the dealership was able to get you a sports car, but without a spoiler?
That would be a non-material breach, since the purpose of the contract was to purchase a sports car. While the dealership did not deliver on one aspect — the spoiler — they were able to get you a sports car with a navigation system and leather interior.
However, if you got a truck instead, that would be a material breach. You did not want a truck. You wanted a sports car. Those are two totally different vehicles. Even if the truck has a navigation system and a leather interior, it is not what you wanted.
So the difference between a material and a non-material breach focuses on purpose. However, the parties may disagree as to what type of breach it really was. The court will look at factors such as:
- How do the parties define a breach?
- Is a party significantly deprived of the benefit of the contract?
- Can the non-breaching party be compensated for the loss?
- Did the non-breaching party contribute to the breach?
- Did the breaching party act in bad faith?
Seek Legal Help
All businesses need contracts to ensure everyone involved holds up their end of the deal. It’s not uncommon for someone to breach a contract, although not all breaches are major issues.
Fort Lauderdale breach of contract lawyer Edward J. Jennings, P.A. understands the challenges involved in creating and adhering to contracts. We can walk you through the process and advise you along the way. To schedule a consultation, fill out the online form or call 954-764-4330.