How Do I Know If a Material Breach Has Occurred?

If you are in the construction industry, you already know how important it is to have a properly-drafted contract in place that protects you and your business before commencing work on any project. A contract, however, can only offer you protection if you understand the terms used in the contract, and understand what happens if a party breaches or defaults on the contract. For example, in the construction industry, there is a significant difference between a simple breach and a material breach of contract. At this point, you may wonder “How do I know if a material breach has occurred?”

The law of contracts dictates that when one party to a contract fails to perform as required under the contract, the other party (or parties) has the right to seek damages from the breaching party. Typically, this means the non-breaching party is entitled to monetary compensation from the party that breached the contact. In the construction industry, however, a non-breaching party may have the legal right to actually terminate the contract as well as seek monetary damages from the breaching party if there was a material breach. This distinction is clearly an important one, as it determines whether or not a non-breaching party is required to continue to perform under a contract or not after there has been a breach.

Unfortunately, there is no universally-accepted definition for the term “material breach” of contract. Therefore, it becomes important to consider how courts have described a material breach in an effort to arrive at a workable definition:

• “…substantial failure to perform, or a breach so substantial as to defeat the contract’s purpose or object”
• “A breach is material where it is so serious and so intimately connected with the substance of the contract as to justify the other party in refusing to perform further.”
• “A material breach goes to the root or essence of the contract”
• “…a breach of such significance or materiality as to preclude adequate compensation in money damages.”

Finally, another court described a material breach this way: “A material breach is a failure to do something so fundamental to the contract so as to defeat its essential purpose.” This definition seems to sum up the difference between a simple breach and a material breach, given the fact that a material breach allows the aggrieved party to terminate the contract.

If you believe another party has committed a material breach in a construction contract in which you are a party, it is in your best interest to have an experienced Pennsylvania construction law attorney review the situation before you decide to stop performing under the contract. Contact the construction law attorneys at Curley & Rothman, LLC by calling 610-834-8819 today to schedule your free consultation.