Every contract is intended to be a mutually beneficial arrangement, where both parties achieve their desired outcome. To ensure that outcome, specific obligations are set forth, defining each party’s obligation and when they must be performed. When one party fails in their obligation, they are in breach of the contract – but not all breaches are equal.
Material breach of contract
A breach is material when one party deviates substantially from the contract’s terms. Typically, this means that the non-breaching party receives significantly less benefit, as a result of the breach, than they would have if the breach had not occurred. Material breaches include both the failure to perform and the failure to perform on time.
An example of a material breach would include when a contract is for the delivery of certain goods – the goods are delivered as promised but the party receiving them fails to pay. Or, you may contract to have a new commercial building constructed but the contractor fails to have the required work completed within a necessary timeframe.
Minor breach of contract
A breach is minor when, despite the failure to perform according to the contract, the goods or services contracted for are ultimately completed. The non-breaching party may sustain some loss but it won’t be considered significant. A reasonable delay, for instance, can be an example of a minor breach. The delay could violate the contract without actually damaging the non-breaching party at all.
Identifying whether a breach is material or minor is a critical first step when they occur. The rights of the non-breaching party, and the remedies available to them, depend upon properly classifying the breach. When in doubt, speak to an attorney who is experienced in commercial breach of contract litigation.