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What are material and immaterial contract breaches?

On Behalf of | Apr 11, 2023 | Commercial Litigation

When making any kind of business agreement where parties provide products or services it’s always a smart move to make a contract. A well-made contract can ensure each party understands their legal obligations and duties. If parties don’t fulfill their end of a contract, then it may be considered a breach.

Contract breaches can lead to significant damages and could even end relationships between businesses. Breach of contracts can happen in many different ways, but you can’t evaluate the problems until you know if breaches are either material or immaterial. Here’s what you should understand:

Material breaches cause significant damages

A contract breach may be material when a product or service isn’t done according to a contract and it resulted in significant damages. While many contract breaches can be resolved, material breaches may lead to the non-breaching party backing out of a deal.

This type of breach could happen if, for example, a business requested new doors that automatically opened to be installed throughout a building. The purpose of this was to support clients and employees who use wheelchairs. The contracted party installed the doors, but the doors weren’t automatic. This issue could have been the fault of the contracted party, causing the non-breaching party to suffer damages. 

An immaterial breach is minor and causes no significant loss

An immaterial breach is something that causes an inconvenience for a non-breaching party. In most cases, these kinds of breaches can be quickly resolved.

Going back to the automatic door example, if the contracted party didn’t finish installing the doors by a specific date, then it may not have seriously harmed the non-breaching party. The end goal of the contract was fulfilled, even if the contract wasn’t upheld to the letter. For example, maybe a distributor promised delivery by noon, but the truck arrived an hour late. If the goods it carried weren’t needed until the next day, that’s an immaterial breach.

If you believe a contract was breached and there were damages as a result, then it may benefit you to learn what legal options you have to seek compensation