What Constitutes a Breach of Contract?
A contract case usually comes before a judge because one or both parties claim that the contract was breached. A breach of contract is a failure, without legal excuse, to perform any promise that forms all or part of the contract. This includes failure to perform in a manner that meets the standards of the industry or the requirements of anyexpress warranty or implied warranty, including the implied warranty of merchantability.
When a party claims a breach of contract, the judge must answer to the following questions:
- Did a contract exist?
- If so, what did the contract require of each of the parties?
- Was the contract modified at any point?
- Did the claimed breach of contract occur?
- If so, was the breach material to the contract?
- Does the breaching party have a legal defense to enforcement of the contract?
- What damages were caused by the breach?
What is the Difference Between a Material and Minor Breach of Contract?
A breach of contract can be material or minor. The parties’ obligations and remedies depend on which type of breach occurred.
A breach is material if, as a result of the breaching party’s failure to perform some aspect of the contract, the other party receives something substantially different from what the contract specified. For example, if the contract specifies the sale of a box of tennis balls and the buyer receives a box of footballs, the breach is material. When a breach is material, the nonbreaching party is no longer required to perform under the contract and has the immediate right to all remedies for breach of the entire contract.
Factors that the courts consider in determining materiality include:
- The amount of benefit received by the nonbreaching party;
- Whether the nonbreaching party can be adequately compensated for the damages;
- The extent of performance by the breaching party;
- Hardship to the breaching party;
- Negligent or willful behavior of the breaching party; and
- The likelihood that the breaching party will perform the remainder of the contract.
A breach is minor if, even though the breaching party failed to perform some aspect of the contract, the other party still receives the item or service specified in the contract. For example, unless the contract specifically provides that “time is of the essence” (i.e. deadlines are firm) or gives a specific delivery date of goods, a reasonable delay by one of the parties may be considered only a minor breach of the contract. When a breach is minor, the nonbreaching party is still required to perform under the contract, but may recover damages resulting from the breach. For example, when a seller’s delay in delivering goods is a minor breach of contract, the buyer must still pay for the goods but may recover any damages caused by the delay.
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