Last edited 09 Aug 2024

Material breach

A material breach is a serious violation of a contract that goes to the heart of the agreement, significantly undermining the contract's purpose or the benefits that one party was expected to receive. When a material breach occurs, it typically entitles the non-breaching party to specific legal remedies, including the right to terminate the contract and seek damages.

A minor breach (or non-material breach) is a breach that is less severe and does not fundamentally undermine the contract. The non-breaching party may still seek damages but cannot usually terminate the contract. For example, a minor delay that does not impact the overall project might be considered a non-material breach.

To constitute a material breach the breach must be substantial and not just a minor or trivial failure. It must affect the fundamental aspects of the contract, such as the quality of work, time of completion, or adherence to specified standards. The breach should deprive the non-breaching party of the primary benefits or purpose of the contract. For example, if a contractor fails to meet critical safety standards, it could be considered a material breach because it significantly impacts the project's viability.

A material breach allows the non-breaching party to choose to end the contract, claiming that the breach is so severe that continuing the relationship is untenable. The non-breaching party can seek compensation for losses incurred due to the breach.They might also have the right to suspend their obligations under the contract until the breach is remedied.

Examples of a material breach might include:

If a contractor fails to meet a key project deadline, leading to significant delays, this might be a material breach, especially if time is of the essence in the contract.
If a contractor or subcontractor delivers work that does not meet the agreed specifications or industry standards, it could be seen as a material breach, particularly if it compromises the safety or functionality of the construction.
If a contractor abandons the project without just cause, this would generally be considered a material breach, as it prevents the project from being completed as planned.
If an employer fails to make critical payments, this could be seen as a material breach, especially if it jeopardises the contractor's ability to continue working.

Whether a breach is considered "material" can be subject to interpretation and often depends on the specific terms of the contract and the circumstances. Courts will look at factors such as the nature of the breach, the consequences, and the intentions of the parties involved.