What Constitutes a Breach of Contract?

A party that suffers damage or injury in a breach of contract claim can recover in a variety of ways. The non-breaching party can enforce the terms of the agreement or bring an action for monetary compensation, depending on the terms of the contract. But the scope and extent of the recovery depends largely on the nature of the breach. Determining whether the breach is material or non-material not only governs whether you can recover, but also establishes your own obligations for the duration of the contractual term. The materiality of a breach is a fact-specific analysis of the parties’ conduct in connection with the contract.

A material breach is a substantial failure to perform the terms of the contract. If a party commits a material breach, then the main purpose of the contract is not fulfilled and the counterparty fails to receive the benefits for which he bargained. The non-breaching party who has experienced a material breach has the right to terminate the agreement and be absolved from all obligations under the contract. In addition, the party is entitled to monetary compensation. He can bring an action for monetary damages or other types of legal remedies. For example, in real estate purchase agreements, the courts may consider awarding specific performance to compel the seller to fulfill his obligation to sell the property to the intended buyer.

A non-material breach is the failure to perform a minor or secondary aspect of the agreement. A non-material breach does not go to the “heart” of the agreement between the parties. A party who suffers a non-material breach of contract may bring an action for damages while continuing to fulfill his obligations under the agreement. A non-material breach will not absolve the party from completing the contract per its terms.

The court uses several guidelines to determine the nature of a breach including: (i) the degree to which the party committing the breach has already met his obligations, (ii) whether the breaching party will fulfill the remainder of the terms of the contract, (iii) if the breach was the result of an intentional or negligent action, (iv) the extent to which the non-breaching party has already benefitted, (v) whether the non-breaching party can be adequately compensated, and (vi) the difficulty incurred by the breaching party if the counterparty is absolved of his obligations under the agreement.

Contact Shane Coons at 949-333-0900 or visit his website at www.ShaneCoonsLaw.com to find out more about his practice.

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What Constitutes a Breach of Contract?

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