![]() ![]() Materiality will be a key issue in determining the extent of the remedy available to the nonbreaching party. Without a default provision, the nonbreaching party is normally entitled to prove and recover actual damages for such a breach, amongst other remedies. “Parties to a contract are free to negotiate and agree upon an alternate, remedial clause,” such as a default provision, and a default provision can trigger consequences as severe as immediate cancellation or termination of the contract. This is called a “default clause.” While “breach” and “default” are typically synonymous terms, the consequences of the breach may differ significantly from a breach triggering an event of default. Most written contracts contain default provisions delineating what “events” constitute a default of the contract, as well as the consequence of an event of default. A default is not a stand-alone concept but is a specific form of breach defined by a contract. The more extreme or severe these factors are, the more likely a court will find a breach to be material.Ī “default” is the omission or failure to perform a legal or contractual duty. (e) the extent to which the behavior of the breaching party comports with standards of good faith and fair dealing. (d) the likelihood that the breaching party will cure his breach, taking account of all the circumstances including any reasonable assurances ![]() (c) the extent to which the breaching party will suffer forfeiture (b) the extent to which the injured party can be adequately compensated for the benefit of which he is deprived (a) the extent to which the injured party is deprived of a benefit that he reasonably expected However, if the contract does not define “material breach,” courts will follow the common law standard for materiality, which looks at the following factors: If the contract itself provides the standard defining a material breach, then that contractual term will bind the parties. In determining whether a breach is material, courts will look to the terms of the contract first. “A material breach is one that goes to the heart of the contract, and whether a breach is material is generally a question of fact to be decided by the trier of fact.” A “material breach” is breach of contract that is significant enough to permit the aggrieved party to elect to treat the breach as total (rather than partial), thus excusing that party from further performance and affording it the right to sue for damages. Ī non-breaching party is only discharged from further performance, and is entitled to substantial damages, when there is a material breach. However, the nonbreaching party is entitled to damages caused by an immaterial breach, although such damages may be nominal in amount. A party is not automatically excused from the future performance of contract obligations every time the other party commits a breach if a breach is relatively minor and non-essential, the non-breaching party is still bound by the contract and may not abandon his duty to perform. However, not every breach discharges the non-breaching party’s continued or future obligations under the contract. Under common law, every breach gives rise to a claim for damages. A “breach of contract” is a violation of a contractual obligation by failing to perform one’s own promise by either repudiating it or interfering with another party’s performance. ![]() However, parties should be careful in defining events of default and their consequences.Ī “contract” is a promise or a set of promises for which the law recognizes a duty of performance and gives a remedy for breach of that duty to perform. As set forth below, contractual default provisions can help courts accurately interpret the specified “events” that give rise to a breach of contract as well as the type and consequence of the breaches. Further, not every breach entitles the non-breaching party to a remedy. While seemingly straight-forward, proving a breach can be a tough burden to bear. In a typical breach of contract action, the party asserting breach must prove: 1) the existence of a contract, 2) the existence and nature of the breaching party’s breach, and 3) damages. Search Blog Modification of Common Law Contract Interpretation in Breach of Contract Actions by Contractual Default Provisions ![]()
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