The Importance of “Material” Matters in Business Contracts

When we enter into a contract with someone, both parties want something from the other. Whether that is an actor coming to your daughter’s birthday party dressed like a princess, a decking company to finish the barbecue area before the fourth of July party, or a multimillion dollar deal for a corporation to perform as a sub on their contract. All of these agreements could be contractual arrangements. One end not performing to their end of the contract could have ramifications for the other party. While this is true, it is important to remember that not every contract breach is equal. If we understand more about “material” breaches, we can craft future contracts in a way that really targets our important items as “material” which will likely result in better protection.

What is a Material Contract Breach?

If you craft a contractual agreement between two parties and one party does not live up to every aspect of the contract, then a breach (to some degree) has occurred. However, it is important to note that not every term or agreement made in a contract is seen as being equally important. A “material” breach is a breach that excuses the non-breaching party from their duties of performance under the contract. A material breach will be found when the breach of the contract “goes to the essence of the contract.” If the breach is simply a small noncompliance or minor failing, that breach will not be deemed “material” to the contract, and the non-breaching party will, in all likelihood, still be required to perform their end of the bargain.

Example Contract Scenario

For example, imagine that “the Green” group contracts with George R.R. Martin to appear at a 3 day writer’s conference in Tampa. The group believes that Mr. Martin’s ties to the event will drive up attendance and visibility for the event. Mr. Martin agrees to appear, and to wear the required green suit and tie.  The Green group has spent tens of thousands of dollars on advertising the event, renting out a space, and pre-ordering T-shirts. What would happen is George R.R. Martin backed out of his appearance, two weeks before the event was to occur? George’s complete absence would seem to be an obvious, material breach of contract. His appearance at the event went to the very heart, or essence of why the contract was created to begin with.

But what about scenarios where Mr. Martin breaches the contract, but not in a way that is so obviously material to the contract? For example, what if Mr. Martin does appear at the event, but only for two hours of the conference, not the entire three days? Alternatively, what if Mr. Martin does attend the full event but he does not wear the green suit and tie as specified in the contract, and that ties Mr. Martin to the Green group?

In instances where it is not quite so clear whether a breach of contract results in a minor infraction, or an actual material breach that would release the non-breaching party from upholding their end of the bargain, you have to look at the contract. Regardless of what either party is saying after the fact – what does the contract say? See our next article for tips on how to craft your contract with your most material items in mind.

Contact Suncoast Civil Law

Our team of Sarasota business litigation lawyers can help you in any phase of business litigation. Contact our office to speak about your case today.

Sources:

casetext.com/case/jf-ln-llc-v-royal-oldsmobile-gmc-trucks-co

floridabar.org/public/consumer/tip012/