If you own a business and have not been sued, there is a strong possibility that it will happen at some point in the future. The reality is that 90% of businesses get sued and that the majority of these cases involve a breach of contract disputes. When there is a breach of contract claim, the breach at issue may be material or immaterial. Here is more on Material v. Immaterial breach of contract:
What is Required for a Contract to be Valid?
Before you can determine if a breach is material or immaterial, you will need to assess whether the contract at issue is valid.
Contract formation requires 3 main elements:
- Offer—one party makes an offer to another party to provide a good or service.
- Acceptance—the other party accepts the first party’s offer.
- Consideration—there is consideration such as money or a promise to pay in the future.
Did the Contract Need to be in Writing?
Once offer, acceptance, and consideration are established, you will need to determine if the contract needs to be in writing. Not all Florida contracts have to be in writing. However, some will not be enforceable unless they are written and signed by both parties.
After determining that you have a valid contract, you can consider the matter of material v. immaterial breach.
What is a Breach of Contract?
A breach of contract occurs when one or both parties fail to perform an agreed-upon term. For example, suppose you had a contract to make 1000 t-shirts for a local store by the first of the year. If you failed to deliver the t-shirts in the agreed-upon condition on the contract date, you would be in breach.
There are different types of breaches with different legal implications. Why does it matter to your business how a breach of contract is classified? It matters because a material breach relieves the non-breaching party of their obligation to perform under the contract. Conversely, with an immaterial breach, the non-breaching party must still perform under the contract.
What is a Material Breach of Contract?
A material breach of contract is a breach that interferes with the purpose of the contract itself. For instance, if the contract concerned the other party delivering flour to your bakery to make bread and they did not deliver any flour, an argument could be made that the breach was material.
What is an Immaterial Breach of Contract?
An immaterial breach of contract is a breach that technically violates the agreement but does not completely disrupt its performance or purpose. To use the bakery example, suppose the other party delivered the flour 12 hours late. If you had a specific time for delivery, the order being late is a breach. However, you have the flour, which may or may not have interfered with your operations. In this situation, the breach may be immaterial.
How Can You Tell the Difference Between Material and Immaterial Breach?
It’s not always easy to tell whether a breach is material or immaterial. Generally, Florida courts will look at the facts and circumstances to determine what type of breach may have occurred. In addition, a reviewing court may examine the intent, how the parties behaved, and the extent of the damages in its assessment.
Why Does it Matter if a Breach is Material v. Immaterial?
Aside from frustrating the agreement’s purpose, the primary consequence of a material v. immaterial breach is how the parties can respond. As explained above, if a breach is material, the injured party may be able to stop performance under the agreement. If the breach is immaterial, the parties can function and must continue to perform as agreed. However, if you stop performance and are wrong, you may be vulnerable to suit.
If you are concerned about whether a breach is material or immaterial, you should contact an experienced Florida business law attorney to discuss your case. Your business lawyer can help you assess your case and determine your options.
Contact an Experienced Florida Business Lawyer
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with commercial leasing, business, and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.