Are you struggling with a business contract partner who has failed to uphold their end of the agreement? At this point, you may want to just end the agreement altogether and go to court to collect your damages. It is only likely that this will happen, however, if there has been a “material” breach of the contract. What is a material breach of contract? Let’s take a look at some of the factors the court will consider in answering this question.
Proving a Material Breach of Contract
Contract law prescribes a material breach of contract as a breach that goes to the heart of the contract, rendering it broken in an irreparable way. A breach is material when it essentially nullifies the reason why the contract was established in the first place. While this may give you some sense as to what constitutes a material breach of contract, it can be instructive and informative to go through some of the factors that are relevant in determining whether a breach of contract was, in fact “material.”
The factors used in determining whether or not a breach was material go to answering the question of whether the breach went to the heart of the contract itself. A court will strive to answer questions like, did the other party sustain a compensable loss? If money will be insufficient to fix things, it is more likely to be a material breach.
The court will also take a look at both parties to the contract and the efforts they have made to complete the contract in whole. Have most of the contractual obligations been fulfilled yet? If so, it is less likely that a material breach has occurred. Is there still a good chance that the party breaching the contract will still try to remedy the situation? If the breaching party has the means and is willing to make the effort to fix the situation, then it is less likely that the court will find that a material breach of contract has occurred. Proof that the breaching party is unable to perform the rest of the contract, such as financial trouble, will act as proof in supporting an assertion of a material breach. If the breaching party is still willing and able to perform the contract obligations, however, then it is unlikely for a court to honor a claim that a material breach of contract has occurred.
Whether or not the breaching party acted in bad faith will also be relevant to this discussion. If the breaching party acted in bad faith, the court will be more likely to see the breach as a material one. Alternately, if the breach was not the result of bad faith, but more like the other party being careless or negligent, then this means there is less likely to be a material breach found. If there were circumstances that arose beyond the breaching party’s control which caused them to breach the contract, then it is less likely a material breach will be found.
While this may be the last thing we mention regarding proving a material breach of contract, it is often the best place to start with this situation. Go look at what the contract says. Oftentimes, a contract will include provisions which will define instances in which a breach of contract will be considered a material breach. Even if there are no specific instances defined, the contract may provide some guidance as to what would constitute a material breach.
Business Law Attorneys
While contract law may not be your favorite, contracts remain an integral part of running a business. If you have business contract troubles, reach out to the team at Jones, Gregg, Creehan & Gerace for assistance. Contact us today.