As a business owner, contracts undoubtedly play a large part in your life. You rely on them to keep your business running smoothly. However, what happens if the other party to one of your contracts fails or refuses to live up to the responsibilities he or she assumed under the contract?
FindLaw explains that failure to perform one or more contract obligations constitutes a breach of that contract.
The Judicial Education Center, however, warns that the other party’s failure to perform generally must rise to the level of a material breach for the court to grant the relief you seek.
Material breach factors
Material breaches mean those that result in your receiving something substantially different from what you expected to receive under the terms of the contract. When determining the materiality of a breach, courts take such factors as the following into consideration:
- The extent of the hardship you suffered because of the breach
- The extent to which court action will adequately compensate you for your losses
- The amount of benefit you already received from the contract
- The extent to which the breaching party already performed under the contract
- The likelihood that he or she will perform the remainder of the contract
- The negligent or willful behavior, if any, exhibited by the breaching party to date
Unlike a material breach that causes your business substantial harm, a minor breach still gives you the goods or services called for in the contract, just not necessarily at the agreed-upon time. For example, if one of your vendors delivers the promised goods a day late, this constitutes a minor breach, assuming the delay did not negatively affect your business.
On the other hand, if your contract included a specific delivery date or a “time is of the essence” clause, this late delivery could turn a normally immaterial breach into a material one.