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'Material' and 'immaterial' breaches of contract explained

Back on Sept. 5, we discussed breach of contract, and when a business may seek damages based on a breach in court. In that post, we mentioned that one of the elements of a breach of contract claim is that the breach must be material. Today, we will discuss the distinction between material and immaterial breaches.

A material breach is one that reaches to the heart of the contract and causes the non-breaching party not to receive the “substantial benefit” of the agreement. It defeats the parties’ intentions, and seems “unfair” to the non-breaching party.

By contrast, a non-material breach is one that violates a minor detail, perhaps unrelated to the subject of the contract, and does not affect the overall outcome of the agreement.

Consider the following example. Company A and Company B sign a contract for Company A to supply widgets to Company B in exchange for payment. Company B makes its first payment on time, and expect its first widget delivery on July 1. But the widgets do not arrive until July 2.

Company B might argue that late delivery was a material breach, if it lost money, perhaps because its customers could not buy widgets on July 1. For its part, Company A might say that a single-day delay was not a material breach, because it still delivered the proper items, and argue that B did not suffer any damages by the late delivery.

If this case led to a lawsuit, one issue would likely be how much date of delivery went to the heart of the contract. Language in the contract that “time is of the essence” would be strongly in B’s favor.

Breach of contract disputes can be more complex than they first seem. A business attorney can help represent your rights.

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