DIFFERENCES BETWEEN MATERIAL & IMMATERIAL CONTRACT BREACHES
Feb. 1, 2022
“Breach of contract” is a term commonly asserted when someone feels shortchanged by the actions or inactions of another. For there to be a breach, however, there must first be the existence of a contract, whether it is express (written), oral, or implied through conduct.
A breach under the law can be considered either material or immaterial: material being a major breach, and immaterial being a minor breach. Both can be subject to litigation if actual damages occur to the non-breaching party to the contract.
If you have suffered damages from a breach of contract or are being accused of breaching a contract in or around San Francisco, California, contact the Law Offices of David H. Schwartz, INC for experienced legal guidance and reliable representation.
Attorney David Schwartz has more than four decades of experience in handling business litigation. He will meet with you, evaluate your situation, and advise you of your best options. If matters do end up in court, he will represent you vigorously going forward, whether plaintiff or defendant.
What Is a Contract?
To be legally binding, a contract must contain certain elements. Different scholars and legal institutions group the categories a bit differently, but there should be at least four elements to make a contract valid:
OFFER: One party promises to do or not to do something.
CONSIDERATION: The other party promises something in return, often products, services, or cash, depending on the agreement.
ACCEPTANCE: The offer is accepted unambiguously, whether through words, deeds, or performance. Signing a contract is a deed of acceptance if it’s an express contract. Words of agreement can signal acceptance in an oral contract, and performance can indicate acceptance in an implied contract.
MUTUALITY: The parties to the contract have a “meeting of the minds” in understanding its terms.
What Is a Breach of Contract?
California courts have been consistent in defining the legal basis for a claim of breach of contract. A case from 1968, Reichert v. General Insurance Company of America, defined the “essential elements” of a breach of contract lawsuit as “(1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff.”
The plaintiff is the non-breaching party who in order to bring a lawsuit must have lived up to their standard of performance or had a valid excuse for not doing so.
What Is a Material Breach?
A material breach goes to the heart of the contract, jeopardizing or even voiding the whole purpose of the contract. A material breach is also known as a fundamental breach.
As an example, suppose you own a firm that manufactures drones, and you contract with a microchip supplier for 200 microchips to be delivered each week. If the chip supplier never delivers the chips or delivers some that won’t work according to the specifications you provided, that would be a material breach.
Now, if the supplier realizes he shipped the wrong chips and replaces them with the proper ones, that would correct the breach. In short, if a breach can be – and is – corrected, then it most likely would not be actionable as a material breach of contract unless the non-breaching party suffered damages.
What Is an Immaterial Breach?
Using the same drone manufacturer example, say the supplier is a few days late on delivering the chips and offers an explanation. That would be an immaterial breach. You may be delayed in manufacturing the drones, but the contract is still in place. In short, an immaterial breach doesn’t threaten the future of the contract.
In a breach of contract, if the non-breaching party suffers damages – loses money or has to expend additional resources to make up for the breach – then it is possible to file a lawsuit and potentially recover compensation by proving the elements of a breach of contract outlined above. Even an immaterial breach can sometimes be actionable, provided damages are suffered by the non-breaching party.
The other types of remedies include a court order for “specific performance,” requiring the breaching party to live up to the contract, and cancellation and restitution – meaning the non-breaching party can simply cancel the contract and return to the situation it was in operationally before the contract.
How Legal Counsel Can Help
Disputes almost inevitably arise in any business operation, and a suspected breach of contract is often the source. Someone simply doesn’t live up to their part of the bargain for one reason or another. Whether the dispute rises to the level of an actionable breach is something that an experienced attorney should evaluate for you.
If you’re in the greater San Francisco area, including nearby Oakland, San Jose, Santa Clara, San Mateo, and all of Alameda County, bring your potential breach of contract cases to the Law Offices of David H. Schwartz, INC. Attorney David Schwartz will weigh the circumstances and advise you of your best option going forward to resolve matters.