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What is a material breach of contract?

by | Apr 1, 2015 | Business Litigation

A promise that isn’t kept can cause more than disappointment for a Larimer County business. Let’s say you own a company that manufactures model airplanes. The wing supplier consistently delivers on time, but the engine supplier repeatedly makes excuses for late shipments, costing you money and damaging your reputation with distributors and retailers.

The engine supplier promised delivery by a certain date every month but hasn’t lived up to the commitment. Meanwhile, your assembly workers are standing idle waiting for a delayed engine shipment to arrive. You put up with a few delays and then expressed concerns when the late pattern failed to change, but the engines regularly continued to arrive late.

A Colorado civil court could decide the engine supplier is liable for a breach of contract if the plaintiff shows the supplier had no valid reason for violating the terms of a business contract. Before an award is made, a judge would determine whether a contract and excuses to break the agreement were valid and examine the contract terms. A court also would assess any damages caused by the broken promise and decide whether the breach was minor or material in nature.

A minor breach involves a party’s failure to live up to a contract without depriving the non-breaching party of the promised goods or services. The late supplier from our earlier example may be responsible for a minor breach, since the manufacturer eventually did receive the engines. However, the breach might be more serious depending on the shipping provisions outlined in the companies’ agreement.

In material contract breaches, the non-breaching party does not receive the goods or services promised. Damages for minor breaches may be limited to losses caused by a contract violation. Material breaches release non-breaching parties from contractual obligations and allow them to pursue additional compensation.

Evaluations of breach complaints are conducted by contract dispute attorneys.

Source: Judicial Education Center, The University of New Mexico, “What constitutes a breach of contract?,” accessed April. 01, 2015

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