Contracts may govern a number of relationships in your life. Certainly, it is wise to utilize contracts to clearly outline obligations and expectations in business relationships. While everyone's hope is that contract relationships will proceed free of disputes, that is not always the case. To better understand the rights and remedies of parties to a contract when a breach of contract has occurred, it is helpful to understand what a material breach is and what is considered a minor breach.
So what is a material breach and why does it matter? A material breach is considered a substantial breach if it causes the non-breaching party to receive a benefit that is substantially different than the one bargained for in the contract. Whether or not the breach is considered material is significant because it impacts the non-breaching party's remedies. If a breach is a material breach, the non-breaching party is not required to perform the contract and immediately has rights to all available contract remedies.
What is a minor breach and what are the implications of a minor breach? A minor breach occurs when the breaching party fails to perform some part of the contract but the non-breaching party still receives substantially what was agreed to in the contract. If the breach is considered minor, the non-breaching has a duty to perform contract obligations but may seek remedies for the breach. To determine if the breach is material or minor the court may consider a number of factors, including the amount of benefit the non-breaching party received; if the non-breaching party can be adequately compensated for damages; the extent of contract performance by the breaching party; as well as other considerations.
Understanding the different types of contract breach is important because it allows the non-breaching party to understand its obligations under the contract but also the damages that may be available in circumstances when a breach has occurred. Knowledge and understanding of the complexities that can arise when a contract has been breached, and the available remedies, is important in any contractual relationship.
Source: The University of New Mexico Judicial Education Center, "Breach of Contract," Access Nov. 16, 2014