Crafting Contracts with “Material” Items in Mind

As discussed in our previous article, “The Importance of “Material” Matters in Business Contracts,” a binding contractual agreement will involve two or more parties coming together to form an agreement. In exchange for goods, services, or something similar, one party will give the other party some form of repayment, what in the contractual world is known as “consideration.” The consideration is the why behind one party performing for the other.

As we all know, sometimes things do not go as planned. The roofer does not get the job done in 3 days, as promised. Or the princess actress that you hired for your kid’s party comes dressed up as Snow White, instead of Cinderella. What happens when someone does not perform to the terms in the contract?

A non-performance or flaw in performance in a contractual arrangement is referred to as a contract breach. But what can the non-breaching party do about contract breaches? Well, that largely depends on whether the breach in contract was significant enough to be considered a “material” breach.

What is a Material Breach?

A material contract breach means that one party so underperformed on their end of the contract bargain, that the other party should be excused from performing their part of the contract. For instance, if a princess actress is hired to appear at a party but then does not show up, her non-performance is likely enough of a non-compliance as to go against the entire reason the contract was entered into to begin with. Accordingly, a material contract breach has occurred. The person who hired the actress will likely not have to pay, since the actress did not perform.

Breach vs. Material Breach

Be careful not to mislabel every noncompliance in a contractual relationship as a “material” breach. The courts will generally find that if a party largely complied with a contract, both parties are still bound to uphold their ends of the bargain. This means that while the hiring party would likely not have to pay a princess actress who did not show up for a party, they likely WOULD still have to pay if the princess came, but was 10 minutes late. The 10 minutes of non-compliance is likely not significant enough to have been deemed a “material” breach of the contract, if the princess did perform for the rest of the party.

But what if the 10 minutes the princess missed were the only ones that mattered? If that is the case, the contract better have spelled that out. The best defense that contractual parties have for ensuring that they get what they are bargaining for, or are excused from having to fulfill their end of the contractual bargain, is to ensure that the things that are most important or material to the contract are clearly communicated as such.

Highlighting Material Terms in a Contract

If non-compliance in the following things would seem like material breaches to you, ensure that you highlight that fact in the crafting of your contracts:

• Time: If you contract for something to take a week, and the performing party completes it in 10 days, a court is unlikely to call this a material breach. BUT if you need something to be completed in a week and state in the contract that it is vitally important to be completed by X date and the performing party is STILL late by three days – you have a much stronger case that this is a material breach.
• Quality/Specifics: If a new deck is completed as a bi-level instead of a tri-level, and painted blue instead of green, is that material? Look to the contract. A contract should specify the importance of key items. If non-compliance on a particular point would make a huge difference to the contracting party at the time of entering the contract, let the contract language reflect that.
• Identification: If you want something done by a specific party, or you want a specific product, specify the importance of this in the contract. If a similar person or product won’t do, be specific and state the importance of it in the contract itself.

Contact Suncoast Civil Law

Contact the experienced Sarasota business litigation attorneys at Suncoast Civil Law for questions concerning contract breaches and other business litigation matters.

Sources:

espn.com/college-sports/story/_/id/39331484/acc-court-filing-accuses-fsu-breach-contract-seeks-damages

floridabar.org/the-florida-bar-journal/the-material-difference-in-florida-contract-law/