How Does Material Breach Occur In Contracts?

To prevail on a cause of action for breach of contract, a plaintiff must prove four key elements: (1) the existence of a contract, (2) the plaintiff’s performance of the contract or a valid excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff. (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186 [169 Cal.Rptr.3d 475].) Additionally, CACI 303 establishes that the defendant’s breach of contract must be a substantial factor in causing the plaintiff’s harm.

Case law further clarifies that a plaintiff suing for breach of contract must demonstrate that they have fulfilled all their contractual obligations or were excused from performing them. Likewise, if the defendant’s duty to perform under the contract is conditional on the occurrence of an event, the plaintiff must prove that the event transpired. (Consolidated World Investments, Inc. v. Lido Preferred Ltd. (1992) 9 Cal.App.4th 373, 380 [11 Cal.Rptr.2d 524].)

Not every breach by a plaintiff will relieve the defendant of their obligation to perform. The breach must be material, meaning that the plaintiff must have performed the significant obligations required under the contract. Additionally, the obligations must be dependent, indicating that the parties specifically agreed that failure to perform one duty relieves the obligation to perform the other. While materiality is generally a question of fact, the determination of whether covenants are dependent or independent is a matter of contract interpretation. (Brown v. Grimes (2011) 192 Cal.App.4th 265, 277–279 [120 Cal.Rptr.3d 893].)

A material breach of contract occurs when one party’s failure to perform a contractual obligation is so substantial that it discharges the other party from their duty to perform under the contract. Whether a breach is material and thus excuses performance is typically a question of fact. The materiality of a breach depends on its significance and the probability of the injured party receiving substantial performance. Courts have held that a material breach of one aspect of a contract often constitutes a material breach of the entire contract. (Brown, supra, 192 Cal.App.4th at pp. 277–278.)

Examples of Material Breach

1. Failure to Deliver Goods or Services as Promised – If a supplier contracts to provide essential raw materials to a manufacturer but fails to deliver them, the manufacturer may be discharged from payment obligations due to the supplier’s material breach.

2. Non-Payment for Services Rendered – If a client agrees to pay an independent contractor in monthly installments but refuses to make payments, the contractor may justifiably cease work under the contract.

3. Violation of Non-Compete Agreements – If an employee signs a non-compete agreement and immediately begins working for a direct competitor, the employer may consider the contract breached and seek legal remedies.

4. Construction Defects in a Contract for Work – If a contractor is hired to build a house with specific materials and instead uses substandard materials, resulting in structural issues, this could be deemed a material breach, justifying non-payment or contract termination by the homeowner.

5. Failure to Meet Essential Deadlines – If a company contracts a marketing firm to launch an advertising campaign by a critical product launch date but the firm fails to meet the deadline, the company may claim a material breach and seek damages.

Material breaches significantly impact contract enforceability and may justify non-performance by the other party. Ensuring contract clarity and defining critical obligations can prevent disputes and strengthen contractual relationships.

Examples of Minor Breach

1. Delayed Delivery with Minimal Impact – If a supplier delivers goods a few days late but the delay does not significantly disrupt the buyer’s operations, this is considered a minor breach.

2. Slight Deviation in Product Specifications – If a product is delivered with minor differences from the agreed-upon specifications but still serves its intended purpose effectively, it would be classified as a minor breach.

3. Partial Late Payment – If a customer makes a payment a few days late without causing significant financial harm to the other party, this is a minor breach.

4. Failure to Include Non-Essential Contract Terms – If a service provider omits a minor detail from the contract deliverables but fulfills the core obligations, it is not considered a material breach.

5. Negligible Errors in Performance – If a party makes a small error in performing its duties under the contract that does not significantly impact the overall agreement, it remains a minor breach.

Minor breaches typically do not excuse the non-breaching party from their obligations but may still warrant corrective actions or compensation depending on the terms of the contract.

Breach of Contract attorneys in Sari Law Firm led by Yakup Sari can help you to compensate your damages. If you need assistance please call us at 949-426-5071 or e-mail us at info@Sarilaw.us.

Note: This is article is not a legal advice.