Also known as:material breach · material breaches · doctrine of material breach
Written by attorneys · grounded in primary & secondary sources — see below
A substantial failure to perform a contractual obligation that deprives the injured party of the expected benefit of the bargain and discharges that party's remaining duties to perform.
Sources & Authorities
How it applies
Common Examples
2
Officer Withholds Report of Breach
Jordan, chief investment officer at Apex Asset Management, learns that the flagship fund is heavily concentrated in a troubled sector with sharply increased downside risk shown by internal stress tests. Jordan briefs only his immediate team and delays any report to the CEO or board risk committee until the next quarterly review. When losses later occur, the company sues Jordan for breach of duty because he failed to inform superiors of the material breach risk within his functional area.
Landlord Leases to Competitor
A commercial landlord covenants not to lease space in the building for a competing use. The landlord then leases adjacent space to a direct competitor, causing the tenant measurable financial loss from diverted customers. The tenant treats the landlord's action as discharging its own remaining lease obligations and terminates rather than merely seeking damages.
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Cases
Uniform Acts
Model Codes
Restatements
Casebooks
Common questions
Frequently Asked
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What makes a breach material enough to discharge the injured party's duties?+
A breach is material when it deprives the injured party of the expected benefit and the circumstances indicate that the failure is not curable in time to avoid substantial harm. Factors include the extent of the deprivation, the possibility of cure, and whether substitute arrangements can reasonably be made.
Supporting sources
Does an officer's duty to report a material breach require immediate escalation even if the officer attempts an internal fix?+
Yes. The duty requires prompt reporting to a superior officer, the board, or an appropriate board committee of any actual or probable material breach of duty by an officer or employee that the reporting officer believes has occurred or is likely to occur. Private counseling does not satisfy the obligation to inform those with oversight authority.
Supporting sources
Can a partnership agreement make material breach grounds for expulsion before the end of a term or undertaking?+
Yes. In a partnership for a definite term or particular undertaking, expulsion for material breach of fiduciary duty or the partnership agreement before completion of the project constitutes wrongful dissociation, exposing the expelled partner to liability for resulting damages.
Supporting sources
705 F.2d 134, 36 UCC 1 (6th Cir. 1983)Contracts
…the increased prices. Consequently, any refusal by the plaintiffs to pay the price increase sought by Sharon must be viewed as a material breach of the November, 1972 contract which would excuse Sharon from any further performance. Thus, Sharon reasons that its refusal to perform absent a price increase was justified under the…
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