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Material breach


Breach of contract is a legal cause of action and a type of civil wrong, in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance. Breach occurs when a party to a contract fails to fulfill his or her obligation as described in the contract, or communicates an intent to fail the obligation or otherwise appears not to be able to perform his or her obligation under the contract.

In a "minor" breach (a partial breach or immaterial breach or where there has been substantial performance), the non-breaching party cannot sue for specific performance, and can only sue for actual damages.

Suppose a homeowner hires a contractor to install new plumbing and insists that the pipes, which will ultimately be hidden behind the walls, must be red. The contractor instead uses blue pipes that function just as well. Although the contractor breached the literal terms of the contract, the homeowner cannot ask a court to order the contractor to replace the blue pipes with red pipes. The homeowner can only recover the amount of his or her actual damages. In this instance, this is the difference in value between red pipe and blue pipe. Since the color of a pipe does not affect its function, the difference in value is zero. Therefore, no damages have been incurred and the homeowner would receive nothing. (See Jacob & Youngs v. Kent.)

However, had the pipe colour been specified in the agreement as a condition, a breach of that condition would constitute a "major" breach. For example, when a contract specifies time is of the essence and one party to the contract fails to meet a contractual obligation in a timely fashion, the other party could sue for damages for a major breach.

A material breach is any failure to perform that permits the other party to the contract to either compel performance, or collect damages because of the breach. A breach of contract will constitute a material breach if the term of the contract that has been breached is a condition. A term is a condition if it satisfies the test of essentiality. The test of essentiality requires that the promise (term) was of such importance to the promisee that he or she would not have entered into the contract unless he had been assured of strict or substantial performance of the promise and this ought to have been apparent to the promisor. This is an objective test of the parties' intention at the time of formation of the contract.


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