What is Material Breach?

In contract law, a material breach occurs when a party fails to perform the core of the contract’s terms, which defeats the purpose of entering into the contract.

By Brad Nakase, Attorney

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A material breach of contract occurs when one party fails to abide by the contract’s primary purpose, rendering the contract irreparably broken. A serious violation of the core terms of an agreement is a material breach.

In this article, our breach of contract attorney in Los Angeles discusses material breach as follows:

1. Does a Material Breach Always Void a Contract?

2. Has the Injured Party Been Deprived of The Primary Purpose of the Contract?

3. Is Money an Option to Fix a Material Breach?

4. What is Forfeited in a Material Breach?

5. Can A Material Breach Be Fixed?

6. Why Contact an Experienced Attorney?

Does a Material Breach Always Void a Contract?

If the court or jury determines that the breach of contract was material, the contract may be canceled or award the injured party money damages. When one party fails to uphold their contract terms in an unfixable way, the party renders the contract ineffective and create a material breach. Material breaches differ from other contract violations because they deeply break the contract instead of breaching it more superficially.

What Does ‘Material’ Refer to?

The term ‘material’ means the heart of the contract that has been breached. When a material breach occurs, the agreement is broken. In some cases, material breaches are known as ‘total breaches,’ resulting in the victim or injured party (i.e., the party that did not create the breach) terminating the agreement or taking legal action in pursuit of damages.

How is the Level of the Breach Estimated?

When figuring out the level of a breach of contract, the court uses the Restatement (Second) of the Law of Contracts to decide if a material breach has occurred. The court also takes the following conditions into account:

Was the injured party deprived?
The injured party’s options for compensation
Chances of forfeiting the contract
Chances of punishment or crime
Possible solutions

Has the Injured Party Been Deprived of The Primary Purpose of the Contract?

When investigating a material breach, the court must determine if the breach deprived the injured party of the agreement’s main elements.

For example, if an individual buys a television online and pays for surround-sound speakers, and the company delivers the television without the speakers, this may not qualify as a material breach. This is because television was the main focus of the agreement.

Therefore, in the case of the television, the buyer could not terminate the entire agreement. However, they could ask for damages regarding the speakers they are owed or whatever the surround sound speakers are worth.

Conversely, suppose a woman buys an expensive guitar online that is purported to be signed by Jimi Hendrix but receives an old guitar without any signature. In that case, this situation could be a material breach. The entire focus of the purchase was to procure a signed guitar, a piece of history, not simply an old instrument off the rack.

A beneficial way to think about material breaches is to ensure that all contracts contain the correct detail. For example, if a person signs a sales agreement to purchase a car but they do not read it over, and the correct features, such as radio and sunroof, are not included, it will be challenging to prove a material breach.

Is Money an Option to Fix a Material Breach?

In some cases, compensation is a suitable solution for some breaches. For example, if the victim of the broken contract accepts compensation for the breach, then the breach is probably not material in nature.

However, if compensation in the form of services or money will not remedy the breach, the breach may be material in nature and require a different solution.

What is Forfeited in a Material Breach?

When the court seeks to determine whether or not a material breach has occurred, they often ask an important question: Has either party made progress toward fulfilling their part of the contract?

This question is valuable because if the parties decide to terminate the contract, they will sacrifice the work they have done and the progress they have made toward satisfying the terms of the deal.

For example, a building contractor and a homeowner enter into a contract. The builder is supposed to build a new addition, and the homeowner is supposed to pay the builder $10,000.

If the builder has almost finished the addition when the homeowner declares a breach of contract, the breach will not be material in nature. However, the homeowner has received the bulk of the new addition, and if they declared a breach of contract, the contractor could lose all of their money and materials, not to mention the time they spent on the work.

However, if the builder has not started the constriction and the homeowner declares a breach of contract or the builder has recently started and not made much progress, a material breach is more likely.

Can A Material Breach Be Fixed?

Most material breaches are unfixable because of their heavy repercussions. Sometimes, the party who breached the contract can prove that they will solve the problem holding back the contract shortly. If the breaching party can prove that they can perform the terms of the deal, the breach is not material.

However, if it is clear that the breaching party cannot solve the present issues, for example, they run out of money and have no savings, then the injured party can use that information to sue for a material breach.

Again, a material breach is a serious, grave violation that means the contract is unredeemable.

Why Contact an Experienced Attorney?

If you need help with a material breach of contract, contact the experienced legal team at Nakase Wade. In addition, our California business lawyers and corporate attorneys offer free initial consultations and can answer any questions you have.

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