Business relationships are built on contracts. When one party fails to perform their side of the bargain, it can disrupt your entire operation. You may feel frustrated and unsure of your options. In New York, the legal remedy often depends on a key question: Was the failure a “material breach”?
How is a material breach different?
Not every broken promise in a contract gives you the right to walk away or file a lawsuit. A minor, or nonmaterial, breach is a small failure that does not affect the core purpose of the agreement.
A material breach is different. This is a significant failure that goes to the very heart of the contract. It essentially deprives the nonbreaching party of the benefit they were supposed to receive.
What do courts consider?
Determining if a breach is material is not always simple. New York courts will look at several factors to decide. While every case is unique, a court may consider:
- The extent to which the injured party is deprived of the benefit they reasonably expected
- Whether the injured party can be adequately compensated for that lost benefit
- If the party who failed to perform acted in bad faith or intentionally
- The likelihood that the failing party will “cure” or fix their failure
For example, a vendor delivering a product one day late might be a minor issue. A vendor who delivers the wrong product entirely or never delivers it at all is likely a material breach.
Your rights and responsibilities
This distinction is critical because it dictates your response. A material breach may excuse you from your own obligations under the contract. A minor breach, however, generally requires you to continue performing.
Mistakenly treating a minor issue as a material one carries significant risk. If you stop performance when you are not supposed to, you may be the one held liable for breach of contract. Understanding your position before taking action is a vital step in protecting your interests. An experienced attorney can review the specific facts of your agreement and dispute.