An Introduction to Breach of Contract
Fundamentally, a contract is a legally binding promise between two or more parties. Once a contract has been established, each of the parties is obligated to perform their duties under the contract.
Contracts require adequate consideration, which is a bargained-for benefit or detriment. Without adequate consideration, the contract promise will constitute a gift, which is generally unenforceable under contract law (though there are exceptions to the rule).
Confused?
Suppose that an uncle promises his niece that he will purchase her a luxury purse as a gift. Unfortunately, extenuating financial circumstances force the uncle to choose a different, cheaper gift. If the niece decides to sue her uncle for breach of contract, she will most likely fail, as there was no legally enforceable contract, as the uncle did not promise the purse in exchange for adequate consideration. If the niece had reciprocated the promise with an exchange of adequate consideration, she may have a better case. If the niece had agreed to paint her uncle’s house in exchange for the purse, then the uncle’s promise would not be a gift and the oral contract might be legally enforceable.
It is worth noting, however, that even if there is a legally enforceable contract, unless the plaintiff-niece can prove that she has suffered damages as a result of the breach, she would likely be unable to successfully litigate the case.
Though there are an almost endless variety of contracts and provisions that define each party’s duties, all contracts are subject to certain basic rules of contract law.
If one of the parties has violated a contractual obligation, then they have breached the contract. There are many potential conflicts that may arise between contracting parties, such as delays, product or service quality concerns, and pricing concerns, among others. Whether the contract fails or continues after breach depends on whether the breach was material or immaterial.
To summarize, for a breach of contract claim to succeed, the plaintiff must show that:
- There was a valid, enforceable contract.
Remember, there must be adequate consideration. Pure gift-giving is not enforceable under contract.
For an introduction to the process of offer and acceptance by which many valid contracts are formed, please read our article here.
- The contract was breached.
- The plaintiff suffered damages, and there is a legal remedy.
For example, if the defendant delivered an item an hour later than the contract required, but the plaintiff did not suffer any losses or other damages as a result, then the plaintiff would not be able to recover in a breach of contract suit against the defendant.
- Various contract defenses do not apply.
Let’s focus on the specifics of breach.
Material vs. Immaterial Breach
There are two forms of breach: material and immaterial.
A material breach is a breach of primary contractual obligations, thus rendering the spirit – or core – of the contract broken. Material breach usually results in a failure of the contract, after which the plaintiff can sue to recover damages.
An immaterial breach is a breach of secondary contractual obligations, which by their very nature do not end the contract. It can be quite difficult to recover damages for immaterial breach, as the breach necessarily involves a secondary aspect of the contractual bargain. To recover damages for immaterial breach, the plaintiff would have to show that they specifically suffered damages as a result of said immaterial breach, and not due to some other influencing factors.
In simpler terms, material breach covers more essential terms of the contract, while immaterial breach covers less inessential terms of the contract.
Though a plaintiff can potentially recover damages for both material and immaterial breach, the likelihood of success is far greater for a plaintiff suing for material breach.
Importantly, a contract can be written to explicitly state that violation of certain provisions will constitute a material breach. Consider this option when drafting your contracts, so that you can better protect your rights under contract.
Let’s consider an example to further illuminate the differences between a material and immaterial breach.
Suppose that there is a breach of contract case involving a defendant who sold their used television set to the plaintiff, a buyer on the opposite end of the city. The two parties signed off on a written contract, which contained provisions guaranteeing that the television would meet certain technical criteria. Perhaps the contract also guaranteed that the television would be delivered in a week, at a particular time-of-day. None of these provisions explicitly provided that violation would constitute material breach.
The defendant delivered the television to the plaintiff on the correct day, but due to unforeseen traffic conditions, the television was delivered an hour late. The plaintiff’s inspection revealed that the television was in good shape, however, and that it met all the technical criteria that they had agreed to as per the contract.
Given the facts, it is unlikely that the plaintiff will be able to show that the defendant’s conduct constituted a material breach, rather than an immaterial breach. Certainly, a late delivery is unfortunate, but assuming that the television will be used for a number of years, an hour delay in delivery (especially given that the television met all other criteria) is most likely immaterial.
Had the television not met the technical criteria requested in the contract, the plaintiff may have a solid claim for material breach of the contract.
Of course, the facts – if adjusted – may allow for the delay to be considered a material breach. Suppose that the reason for the specific delivery was so that the television could be used for a business presentation to a room of potential investors. The late delivery meant that the television could not be setup in time for the presentation, however. Though it would be difficult to calculate the damages suffered, the plaintiff may be able to argue that the late delivery in such circumstances constituted material breach.
To avoid confusion , your contracts should explicitly state which provisions – if violated – would constitute material breach, and to further minimize potential conflict, you can also include provisions that dictate damages owed upon breach.