Defining material and immaterial breach of contract

In many ways, contracts are one of the most important foundations of business. A valid contract allows two parties to lay out the terms of a business deal or relationship in a way that is legally binding.

Ideally speaking, all parties involved in a contract would always fulfill the terms of a contract to the letter. Unfortunately, businesses cannot count on their partners being reliable all of the time. Furthermore, failure to uphold the terms of a contract can also result in financial losses.

Any failure to meet the terms or end of a contract can be considered a breach of contract, which can provide grounds for legal action.

Breaches of contract are separated into two categories: material and immaterial. A material breach of contract is any violation of terms that results in damages to the non-breaching party. Conversely, an immaterial breach of contract is still an issue, but it does not result in any damages to the other party involved in a contract.

Since businesses rely on the success of contracts and limiting any losses, the logical response to a breach of contract is to recover damages. While it seems logical for businesses to seek compensatory damages, covering the gap for any financial losses that result from a breach, it may also be possible to seek damages for immaterial breaches. In fact, nominal damages amount to the financial recovery a non-breaching party can seek if no other financial losses were incurred.

Of course, the details of every breach of contract case are different. As a result, the approach to each issue is also likely to change. Keeping this in mind, business owners may need to seek assistance to address their specific legal needs.

Source: FindLaw, “‘Breach of Contract’ and Lawsuits,” accessed July 22, 2014