Material Breaches, Time Deadlines and Payment Deadlines in Contracts

When there is a breach of contract, you can sue, and get your damages. That sounds easy, but is that really all there is to it? Not exactly, because what a lot of people don’t realize is that often, it’s about what type or kind of breach has occurred.

Different Breaches

As a general rule, courts like to uphold contracts, and hold both parties to the obligations in their agreements. Courts don’t like excusing people from performing under a contract that they have obligated themselves to perform under.

That’s why not every breach of a contractual agreement is a breach that allows you to sue for damages, or allows the other side to stop performing under the contract. Put another way: not all breaches of a contract are treated the same.

Material and Nonmaterial Breaches

In the world of contractual breaches, there are material and nonmaterial breaches.

Generally, if a party breaches a nonmaterial provision of a contract, the parties cannot sue under the agreement, nor stop performing under the agreement. That only happens when the breach is material.

As you may imagine, there is often a lot of fighting over whether a breach is material or not. To be material, a breach has to go to the very heart and soul of the contract. Courts will generally ask what the purpose of entering into the contract was, and whether the breach defeats or frustrates that purpose. If so, the breach will be considered material.

Time for Performance

One thing that you may think should be considered material, is both time to perform under the contract, and time for payment. You may be surprised to learn that in general, neither are usually considered material breaches—that is, unless you say so, and the parties agree to it, in the agreement.

This is why time is of the essence clauses can be so important. You may believe that the deadlines or time frames for performance in your agreement are material. But unless your contract says so, or unless the nature of the contract makes it plainly obvious that time is important, a court won’t assume that’s the case.

Payment Deadlines

The same is true for payment, especially in situations where the contract may have a payment plan. When a party is a few days late making a payment, a court won’t be too excited to hold them in breach, and void the agreement—again, unless the terms of the contract make that the case.

Note that even if payment on time is not a material breach, that doesn’t mean that you can’t still include late fees or interest or whatever other penalty you want to include in the contract for late payment. It just means that you may not be able to run to court just because a party is a few days late making a payment.

Does your contract say what you need it to say? Call the West Palm Beach commercial litigation lawyers at Pike & Lustig today.

Source:

floridabar.org/the-florida-bar-journal/the-material-difference-in-florida-contract-law/