Immaterial Breaches Are Not Punishable By Law
Business and Commercial Disputes By Harvey Binnall PLLC - 2020/09/30 at 05:01pm
Experienced Business Dispute Lawyer in Alexandria, VA
Breach of contract disputes are highly fact-specific, and so it can be somewhat difficult for parties involved in the dispute to fully understand how the conflict is going to play out should the case go to trial.
For first-time litigants, one confusing issue is that of materiality — whether the breach was material or immaterial. Only a material breach can give rise to liability. An immaterial breach cannot give rise to liability.
It is therefore in the plaintiff’s best interest to establish that the breach of contract at-issue was material. By contrast, is in the defendant’s best interest to establish that the breach of contract was immaterial — by doing so, the defendant (who breached the contract) can avoid damages liability.
Let’s briefly explore.
Material vs. Immaterial Breach
Whether a breach is material is ultimately a question of whether the breach at issue significantly affected the outcome of the contract, and in doing so, interfered with the purpose of the contract. Put another way: if the breach prevents the non-breaching party from enjoying the “benefit of the bargain” underlying the contract, then a court is likely to find that it is material.
Theorizing as to material and immaterial breach can be a bit confusing, so let’s use a quick example for clarity.
Suppose that you own a valve manufacturing business. You enter into a contract with a tool manufacturer to provide your initial shipment of specialty valves by a particular date — let’s say May 15. It’s fair to say that time is of the essence. You are aware that the tool manufacturer is themselves under a time crunch. They must manufacture their own set of products (using your valves) and send them out to another client by May 21. Failure to do so in a timely manner will result in significant monetary losses to them.
Unfortunately, various organizational issues cause you to be late in shipping out the specialty valves to the tool manufacturer. You ship out the valves on May 20, giving the tool manufacturer no time to complete their shipment to the third-party. As such, they are unable to fulfill that separate contract and suffer significant damages. Your time delay on the shipment is arguably a “material” breach as timely delivery could be considered fundamental to the contract itself.
Now, taking this example, if you had only been a day late (and thus, did not impact the tool manufacturer’s ability to perform their obligations in shipping out to the third-party buyer), then the breach may have been “immaterial.” To a significant degree, the materiality calculus is fact-based.
Contact Harvey & Binnall, PLLC for Guidance
Harvey & Binnall, PLLC is a boutique commercial litigation firm based in Alexandria, VA and serving clients throughout Virginia, Maryland, and the DC Metro Region.
We pride ourselves on our commitment to client-oriented representation. Our attorneys have several decades of experience assisting clients at every stage of a business dispute (including breach of contract disputes), from initial settlement discussions with opposing counsel to trial litigation.
If you would like to speak to an experienced Alexandria business dispute lawyer at Harvey & Binnall, PLLC, call us at 703-888-1943 or send us a message online to request a meeting at your earliest convenience.
We look forward to helping you successfully navigate the conflict.