Agreements or contracts are the foundation of many business relationships. They’re essential for smooth transactions and successful partnerships. But, what happens when one party doesn’t hold up their end of the bargain? This is where the term ‘material breach’ comes in. This type of breach is not something as small as a minor mistake or delay. It’s a significant failure that disrupts the very heart of the agreement.
A material breach can cause serious harm to the business that kept its end of the deal. It can happen in many ways, and when it does, it often leads to legal action.
Situations of a material breach
A material breach can disrupt business operations and trust between parties. It can manifest in various ways:
- Failing to deliver promised goods or services
- Providing goods or services that fall significantly short of the agreed quality
- Missing a critical deadline
When a material breach happens, the non-breaching party doesn’t have to continue with the agreement. They can terminate the contract and seek legal remedies, such as asking the offending party to correct the issue.
For example, say a construction company (Party A) promises a real estate developer (Party B) to build a residential complex within a year using high-quality materials. But Party A doesn’t meet the deadline and uses substandard materials. This is a significant breach of contract. Party B can stop the contract and ask for compensation for fixing the work and hiring a new construction company.
When a breach calls for legal action
When a material breach occurs, the non-breaching party has several options. They can go to court and ask for a “specific performance.” This court order requires the breaching party to fulfill their promises. In the case of the example above, the court might order Party A to complete the construction as initially agreed.
However, determining whether a breach requires legal action depends on several factors. It usually requires a careful examination of the facts in a legal setting. So, businesses dealing with a potential material breach should consider seeking legal help. A legal professional can provide advice based on the specific details of the case and help protect the rights of the non-breaching party.
