What is the difference between a material and a non-material breach of contract?
What legal recourse is possible?
How to evaluate a contractual breach?
In this article, we will break down the concept of a material breach and a non-material breach of contract so you know all there is to know about it.
Are you ready?
Let’s get started!
What is the definition of a material breach?
A material breach is defined by thelaw.com as:
“A serious and significant breach of contract or failure to perform an important and essential contractual obligation whereby the purpose, value and benefit of the contract is frustrated or lost. This excuses the non-breaching party from further performance and the non-breaching party has grounds to sue for breach of contract.”
In simple terms, it means that a contractual party does not receive his or her fair share of the bargain.
Due to the failure of the breaching party, the non-breaching party fundamentally loses the intended benefits or is frustrated in some form or fashion.
When referring to a material breach, the term “material” is to suggest “total” or “significant”.
The “material” breach is a type of breach that renders the entire contract useless for the non-breaching party.
What is the definition of a non-material breach?
A non-material breach is when a contractual party fails to perform more minor obligations of the contract leading to a breach of lesser gravity.
To say “non-material” is to say “minor” or “immaterial” suggesting a failure of some sort but not affecting the fundamental obligation of the contract.
You have a minor breach when a contracting party is able to fulfill the main contractual purpose or objective but fails at some aspects of the obligation.
For example, if you hired a contractor to renovate your basement and they failed to do the renovations at all, that would be a material breach.
However, if they completed the renovation of the basement but the doors were not properly angled or installed at the right place, that would be considered a non-material breach.
Example of a material breach vs minor breach
In a nutshell, the main difference between a material breach of contract and a minor breach of contract is the impact on the “goal”, “objective”, “purpose” of the contract.
Let’s look at an example of a material breach versus a minor breach.
Imagine that you entered into a contract with a car dealership to purchase a sports car with leather seats, GPS and a sport package.
If they deliver the sports car with the leather seats and GPS but without the sport package, is that a material breach or minor breach?
This is a minor breach as the main objective of the contract was the delivery of a sports car.
However, certain aspects of the contractual obligations were not respect: you did not get the sports package.
On the other hand, imagine that they deliver to you a truck or a van.
That’s a material breach as the entire purpose of the contract was for you to purchase a sports car.
Even if the van has the leather seats, GPS and sports package, that’s not what you wanted to buy.
Evaluating material vs non-material breach of contract
A material breach is a type of contractual breach that affects the entire purpose or reason why the parties contracted with one another.
In some cases, the contractual parties can disagree as to what may be a material breach and what may be a more minor breach.
To resolve this issue, in every jurisdiction, the courts have their own rules to distinguish a material breach of contract versus a minor breach of contract.
Generally speaking, here are some factors that the courts will consider to distinguish material vs non-material breach:
- How do the parties define a breach under the contract?
- Is a party frustrated or deprived of the benefit of the contract in a significant way?
- Can the non-breaching party be compensated for the loss?
- How much benefit did the non-breaching party lose due to the breach?
- How much did the breaching party lose to execute its obligations?
- How much effort did the breaching party put in performing its contractual obligations
- How did the non-breaching party contribute to the breach?
- Is the breaching party able to execute its obligations?
- Was there an intention behind the breach of contract?
- Did the breaching party act in bad faith?
When there is a dispute as to the qualification of the breach, the court will consider all the contextual and circumstantial facts surrounding the contract to determine if the breach is major or minor.
Contractual definition of a breach
In some cases, the parties to a contract will mutually agree to define what is a “material breach” and what is a “non-material breach”.
That’s often the case in business transactions, particularly when the obligations of the parties are complex and the value of the contract is important.
When the parties contractually define a specific event as a “material breach”, then the courts will give act to the intention of the parties even though the act could have been considered as a non-material breach.
For example, say you purchase a sports car from a dealer and specify that you want leather seats.
On the day of the delivery of the sports car, you realize that you did not get leather seats.
This is an example of a non-material breach.
You have the option to ask for the dealer to compensate you for this minor breach or to provide you with leather seats.
You cannot refuse to pay for the car due to this minor breach.
It’s a minor breach as the purpose of the contract was the delivery of a sports car and the dealer achieved it.
Now for the sake of argument, imagine that you had stated in the contract that having leather seats is an essential consideration for you and you also state that failure to deliver leather seats will be deemed as a material breach.
In that case, if the dealer fails to provide you with leather seats, contractually you’ve defined that to be a material breach even if the courts would have qualified that as an immaterial breach.
In this case, you can refuse to pay for the entire car as you contractually agreed that missing leather seats will be deemed as a material breach.
What is the difference in the recourse between material and non-material breaches?
Let’s look at the remedies possible in the case of a material breach of contract as opposed to a non-material breach of contract.
Material breach of contract remedies
In the case of a material breach, the non-breaching party will generally have the option not to perform his or her obligations towards the breaching party.
That’s called the option for non-performance.
The non-breaching party can also demand that the breaching party execute its obligation as it was originally intended in the contract.
That’s the option for specific performance.
However, most often, the non-breaching party may claim for monetary damages to compensate for the damages or injuries suffered.
For example, you hired a contractor to renovate your basement and he or she barely did anything.
That’s a material breach.
You have the option of not paying the contractor what you had agreed to under the contract (option of non-performance), you can ask the contractor to finish (option of specific performance) the job or you can claim damages (option of monetary damages).
Handpicked related article: Be sure to read our article on the consequences of a breach of contract as our handpicked related article!
Non-material breach of contract remedies
When confronted with an immaterial breach, the main difference is that the non-breaching party does not have the option to non-performance.
The non-breaching can always demand the specific performance of the contract or compensation but cannot stop executing its own main obligation towards the breaching party.
In our example of the contractor, if the renovation was done but a few doors where not installed at the right place, the non-breaching party can demand that the door placement be fixed or get compensation.
However, the non-breaching party cannot refuse to pay the entire renovation cost due to the non-material breach related to the doors.
Takeaways
A material breach of contract means that a contractual party does not receive his or her fair share of the bargain.
There is a failure to perform contractual obligations.
Due to the failure of the breaching party, the non-breaching party fundamentally loses the intended benefits or is frustrated in some form or fashion.
A non-material breach of contract is when a contractual party fails to perform more minor obligations of the contract leading to a breach of lesser gravity.
You have a minor breach when a contracting party is able to fulfill the main contractual purpose or objective but fails at some aspects of the obligation.
In some cases, it may be easy to qualify a breach as material or minor.
In some other cases, it may be more challenging.
The qualification is important as it affects the possible remedies or recourses possible to the non-breaching party.
The main difference is that the non-breaching party as the option of not performing his or her own correlative obligations (non-performance) when there is a material breach while this is not possible for a non-material breach.
Generally, the remedy of specific performance, which is to demand the execution of the obligations, and monetary compensation, which is to claim damages for losses suffered, is available to both material and minor breaches of contract.
We hope this article gave you additional insights to make out the differences between what’s an important breach of contract versus what’s a more minor breach of contract.
