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What is a material vs. non-material breach of contract?

On Behalf of | Sep 2, 2023 | Business And Commercial Litigation |

When businesses work with others, each party typically expects something in return for the service or product provided – and contracts are the only way to make sure that everybody upholds their end of a bargain.

A contract helps each party understand their responsibilities and legal obligations in a professional transaction. A contract may detail what each party is expected to provide and what they will get back in return. A well-made contract can also detail what happens when one side fails to deliver. In other words, when a breach of contract happens, then the non-breaching party expects some sort of resolution. However, not all breaches are the same:

Non-material breaches

A minor, “non-material,” contract breach can happen if something in the contract isn’t done, but the results don’t cause significant harm to a party. For instance, imagine that a financial advisor has a contract with a client to provide a monthly portfolio update. Due to an unforeseen event, the update is a day or two late one month. Assuming the delay doesn’t cause any significant losses, the client may be aggravated but the issue can generally be resolved without litigation.

Material breaches

A major, or “material,” breach, however, can lead to serious damages. This kind of breach happens when the terms of a contract aren’t met exactly as instructed. For example, imagine that a financial advisor has an agreed-upon conservative investment strategy with a client. If the advisor decides to take a chance on a high-risk asset without the client’s consent and loses money, that action fundamentally violates the heart of the agreement. 

A breach of contract can ruin professional relationships. If you are concerned about what may happen due to a breach of contract, it’s always wisest to get experienced legal guidance.