Contracts are the backbone — and lifeblood — of most business agreements. They make sure that all parties involved understand their obligations (and the penalties for failure).
Unfortunately, failures can and will happen. When one party doesn’t uphold their end of a bargain, that’s considered a breach of contract — but not all breaches are equal. Some are material, significantly impacting an agreement. Others are immaterial, causing minor inconveniences but not undermining the contract’s core purpose.
A material breach is a serious violation
A material breach occurs when one party’s failure to perform goes to the heart of the contract, depriving the other party of what they were promised. This type of breach is significant enough to justify legal action and may allow the non-breaching party to terminate the contract and seek damages.
For example, imagine that a pub enters into a contract with a brewery to receive a shipment of green beer for its St. Patrick’s Day celebration. The contract explicitly states that the green beer has to be delivered by March 16th, so that it’s in time for the annual festivities. The brewery, however, fails to deliver until the 18th — and the bar gets stuck with a lot of green beer that nobody wants. That’s the root of a significant financial loss and reputational harm to the business, and it is a material breach.
An immaterial breach is a minor problem
By comparison, imagine that the brewery makes its delivery early on the morning of March 17th. That’s an inconvenience to the pub, but not a disaster. The pub is still able to hold its annual festival on time and turn a profit, and the customers are happy. There’s no serious damage done, and there’s no real cause for terminating the contract with the brewery or taking legal action.
By distinguishing between material and immaterial breaches, businesses can avoid unnecessary disputes — and take legal action when it is warranted.
