Contracts are an integral part of running a company. When you're a business owner, they will protect your interests and ensure that your dealings with partners, employees, vendors, and other parties are fair. Because contracts are so integral to running a business, a material breach of contract — when one party significantly violates the agreement — is a serious matter that requires the help of an experienced commercial litigator.
In this blog, Reno and Sacramento based attorney Raymond E. Areshenko breaks down what constitutes a material breach and the steps necessary to prove it. Mr. Areshenko is an experienced business attorney who has been recognized as one of the top lawyers in that field. If your company has been victimized by a breach of contract, he will fight on your behalf.
Minor vs. Material Breach of Contract
There are two different types of contract breaches recognized by the law:
- Minor violation: This less severe form of contract breach gives the harmed party the right to sue for damages but does not excuse them from fulfilling their part of the contract. Many minor breaches can be resolved without litigation if the offending party simply corrects the wrong and performs their duties
- Material breach: This is a far more severe form of contract breach. Material breaches are significant violations that undermine the purpose of the contract itself. If you think a material breach has occurred, you should speak to a lawyer immediately. Material breaches excuse the harmed party from fulfilling their contractual duties and give them the right to sue for damages.
Examples of Minor and Material Breaches
Let's say you own a construction company. You go to a dealership to order a custom work truck for your employees to get to job sites. One of the specifications of the contract is that the truck has heated seats. The dealership delivers it as ordered but accidentally forgets to install the heated seats. This would be a minor breach because the dealership still provided a working vehicle with every other specification, and it can compensate you for the lack of heated seats.
If, however, the dealership delivered a truck whose transmission blew out a week after you received it, that would likely be a material breach because an operable vehicle was the entire point of the contract.
How Do Courts Determine Whether a Breach is Minor or Material?
Courts evaluate contract breaches on a case-by-case basis. Generally, these are the questions they ask to decide if a violation was minor or material:
- Was the harmed party deprived of the purpose of the contract? Consider the previous hypothetical about the construction company's work truck. If the dealership delivered an otherwise working vehicle missing only a frivolous feature such as heated seats, that does not deprive the company of the purpose of the contract. If the truck's transmission is faulty, the harmed party — the construction company — did not get what it contracted for.
- Can the harmed party be compensated? If the breaching party can remedy the damage with money, or by merely fulfilling the part of the contract they initially failed to follow, courts are unlikely to find a material breach.
- How much of the contract has the breaching party completed? If a homeowner hired a contractor to build a custom deck, then declared a breach of contract when the project was near completion, courts are less likely to find a material breach. This is because the contractor would lose much more in time and money than if the homeowner declared the breach earlier in the process, as well as because the majority of the contractual obligations were completed.
- Can the breaching party fix the harm? If the breaching party proves that the contractual problems can be solved by providing security for a promised payment or another reasonable assurance that it will honor the deal, the breach is probably minor.
- Did the breaching party act in bad faith? If the contract was breached intentionally, courts are incredibly likely to find a material breach.
- Is the harmed party willing and able to fulfill their contractual duties? Courts will probably not rule that a breach is material if the party suing for harm cannot prove that they performed their duties as specified in the deal.
- What does the contract say? Some contracts have language that specifies precisely what constitutes a material breach. These clauses could be anything from hard deadlines to payments to the requirement to maintain insurance for a financed car.
Contact Our Reno Breach of Contract Lawyer Today
Mr. Areshenko will fight for justice and compensation on your behalf if your business has been harmed by a breach of contract. He serves Reno, Sparks, and surrounding areas of Nevada and California. Call (775) 353-6611 today to schedule a consultation. REA Law also has offices in Sacramento servicing the greater Northern California area. For cases in California, call 916-800-6090.