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Contract Law: Understanding The Difference Between “Material” and “Immaterial” Breaches

by | Jul 14, 2019

For as long as there have been contracts, there have been parties to those contracts who have failed to abide by them—whether purposefully or otherwise. When this occurs, it is known as a ‘breach’ of the contract. Most good contracts address what happens if a party to the contract breaches the agreement. Often times, that language allows the parties to go to court to find out whether the breaching party was justified, and if not, how much they owe in damages to the other party.

Up until recently, courts adjudicating breach of contract cases in Florida have applied the same three element test that is taught to first year law students the world over: 1) whether there is  a valid contract; 2) whether the contract was breached? and 3) did the breach caused damages. The court did not concern itself with the seriousness of the breach. Any breach from the most minor to the most heinous was generally given the same treatment by the courts.

In this world, material breaches—those that are so egregious and catastrophic as to render the contract seriously injured or even dead on arrival—were held to the same standard as immaterial breaches—those that are minor or not serious enough to kill the contract. If the breach was material or immaterial, the party suing could seek both damages and other relief such as requiring the other party to perform their obligations under the contract.

What has started happening in Florida, however, is that some courts have begun requiring that the breach be material to warrant both damages and performance relief. Where there is an immaterial breach (or a partial breach), the party suing is limited to recovering damages.

This has brought the difference between material and immaterial breaches into stark, practical relief. Now, to have an actionable material breach, the plaintiff must prove that the defendant’s breach went to an essential element of the contract. That is, the defendant didn’t do some required, essential thing; or, the defendant did something that was explicitly prohibited by an essential provision of the contract. Immaterial breaches that do not go to some essential element of the contract are, well, immaterial.

What is even more surprising is that the Florida Supreme Court has not adopted this materiality requirement in any case. Yet, it has allowed it to seep into its standard instructions for juries to consider when they are deliberating on a breach of contract case. The implications of this change do not stay in Florida. Already, federal courts in other jurisdictions having to apply Florida law in breach of contract cases have had to confront this anomaly.

The evolution of materiality has gone from material and immaterial meaning different things but warranting the same treatment by the courts to material and immaterial breaches meaning different things and being treated differently in litigation.

Regardless of whether they are material or immaterial, breaches of contracts that implicate your business are still very serious and material to you. For this reason alone, if you face a situation where a party to your contract is in breach or where you are being accused of being the party in breach, it would be a very worthwhile investment to contact the Campbell Law Group for the legal guidance you most assuredly will require.

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