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5 factors of a material breach of contract

On Behalf of | Jan 10, 2017 | Breach Of Contract

In an ideal situation, business agreements would all be fulfilled in a manner that mutually benefits all parties. Unfortunately many disputes can arise in the course of doing business. Whether it is a financial issue, delay, miscommunication or some other hindrance, contracts can be broken. You should understand when an unfulfilled obligation classifies as a material breach.

1. Irreparable agreement

A material breach occurs when one party is unable to perform the contractual obligations to the extent that it renders the agreement useless. Material breaches are sometimes called total breaches because they negate the root of the contracts.

2. Deprived of a bargain

Another sign of a material breach is if the harmed party is not given what the contract promised. If you as the harmed party were given a completely different product or service than agreed upon in the contract, you did not receive the item for which you entered the contract in the first place.

3. Not solved by monetary compensation

If the problem can be resolved through a reasonable amount of expense or effort while retaining the contact, the breach may not be considered material. Some problems cannot be solved as easily, in which case it is more likely to be a material breach.

4. Bad faith

Sometimes breaches occur due to mistakes, negligence or circumstances beyond control. Other times they are done willfully in an act of unfairness. If this is proven, it is likely a material breach. For instance, if an executive refuses to follow contractual directions and is purposefully insubordinate, he or she may be materially breaching the employment agreement.

5. Few obligations completed

Determining whether a contract was materially breached has to do with how much of the contract was completed. This has a lot to do with timing. If the vast majority and most important obligations are completed, the breach may not be material and the contract will not be cancelled. However, if relatively few obligations were fulfilled, you may have a better case for a material breach.

Disputes regarding breaches of contract are quite common, because they affect businesses of all sizes in every line of work. If you are dealing with situations such as failing to adhere to a non-disclosure agreement, nonpayment or contract fraud, you should know your rights and seek legal remedies to your problem. Contacting a business litigation attorney with an expertise in breach of contract disputes can give you the guidance, representation and legal solutions you need for your business.