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Some Material About Breaches

by | Jun 18, 2022 | Firm News |

A contract is a mutual exchange of promises. The failure to perform a contractual promise once performance becomes due is a breach of contract. But what is the effect of a breach of contract? That can be complicated.

Every breach provides a remedy to the non-breaching party. The non-breaching party does not have to avail itself of a remedy, however. Many times, breaches are simply ignored or waived. If the non-breaching party does not act promptly to assert its claim of breach, it may be deemed to have accepted a lesser performance.

When a breach is declared, what are the options? Sometimes a substituted performance is accepted in lieu of the original promise. Sometimes a modification to the agreement is made to compensate the non-breaching party for the loss caused by the breach. Sometimes the appropriate remedy is a claim for damages. Keep in mind that there are several approaches to contract damages, but the preferred approach if possible is to put the non-breaching party in the same place as it would have been had the contract been fully performed.

But can the non-breaching party declare the contract to be over and walk away from its obligations? The answer is a resounding maybe. Where the breach is a material one, the non-breaching party can declare the remaining contractual obligations to be over and sue for breach. But where the breach is not material, the non-breaching party does not have this right. What is a “material” breach? That’s a factual question that will vary on a case by case basis. But it is essentially a breach that is substantial and significant such that, in fairness, the non-breaching party should not be required to have to continue to perform without the assurance that it will receive the contractual bargained for exchange.