You breach a contract by violating one of its terms. California contract law, however, distinguishes between “material” and “immaterial” breaches. A material breach is a serious breach, while an immaterial breach is not so serious. Paying your rent a day late, for example, might be seen as an immaterial breach while paying it two months late would probably be considered a material breach.
The difference in effect is significant. If the breach is material, the other side has the right to quit the contract immediately (and file a lawsuit for breach of contract). If the breach is immaterial, the other side is entitled to damages but is still bound to the contract. Whether a particular breach of contract is “material” or “immaterial” is a significant source of uncertainty – a non-breaching party is frequently unsure of whether it is entitled to terminate the contract.
Definition of “Material Breach”
A contract is a bargained-for exchange in which each party anticipates benefiting in some way. A material breach “gets to the heart of the contract” in the sense that it would defeat the purpose of the contract (from the standpoint of the non-breaching party) if the breach were to remain unrectified. An immaterial breach, on the other hand, is the violation of a minor contractual obligation such that the essence of the deal is unaffected – notwithstanding the breach.
Unfortunately, despite this definition, a certain amount of ambiguity remains concerning whether or not a particular breach is “material.” The following contract drafting guidelines might help reduce this ambiguity.
Contract Drafting Concerns
The contract should provide a detailed list of “material” breaches.
Include a carefully drafted section that lists specific acts and omissions and identifies them as material breaches justifying termination of the contract. Use “Including but not necessarily limited to” language, if appropriate, to prevent one party from arguing that his breach was not material simply because his action was not specifically listed in the contract.
The contract should include a “Notice and Opportunity to Cure” clause.
Consider drafting a section that obligates the non-breaching party to notify the breaching party in writing of his breach, allows a certain period (30 days, for example) for him to “cure” (rectify) his breach, and provides that the non-breaching party has the right to terminate the contract if the breaching party has not cured his breach within the specified time frame.
Set objective standards to determine whether or not a breach occurred. Don’t hide behind ambiguous wording such as “reasonable” or “best efforts” unless it is necessary (and sometimes it will be!). Where possible, set up numerical or otherwise objectively verifiable standards to determine whether or not a material breach occurred.
Contact the Professionals
If you are stuck in a contractual relationship that you don’t feel safe in terminating, or if you need to draft a contract that will remove as much ambiguity as possible, contact CKB Vienna by calling or by filling out our online form to schedule a consultation where we can explore your options. Our firm serves clients in Rancho Cucamonga, San Bernardino County, Los Angeles County, Orange County, and Riverside County.