In U.S. contract law, a contract is considered “irreparably broken” after a “material” breach of contract—a breach that is so severe that essentially destroys the basis of the contract and goes to the root of the agreement between the contract’s parties. If a material breach occurs, the non-breaching party can end the agreement and attempt to collect damages resulting from the breach.
With this in mind, here are some factors to consider when determining whether a contract breach was a material breach.
The extent to which a party was deprived as a result of the breach
The main question in determining whether a breach was “material” is whether that breach deprived the other party the main issue or “heart” of what was being bargained for. Let’s say, for example, you entered into a contract with a party to install high-quality security features at your office building, but instead the contractor installed low-quality equipment not designed for improving office safety and security, this would be a material breach. Even though the contractor installed equipment, it did not fulfill the primary intent or “heart” of the contract, which was formed to increase safety.
It would not be a material breach of contract if the contractor installed equipment that met your safety standards, but used a different brand than had been agreed upon. The main intent of the contract has still been met, so it cannot be a material breach.
The ability of the other party to be compensated for the losses caused by the breach
Will money be able to solve the losses caused by the breach, and to what extent? A breach is less likely to be classified as material if it can be solved relatively easily with a reasonable amount of effort or money. For it to be material, the losses must be significant.
Whether the breaching party acted in bad faith
If the breach of contract was the result of bad faith or was purposeful, the court is much more likely to consider it a material breach. Compare this to breaches that result from carelessness or other circumstances beyond the control of the breaching party—these types of breaches are not likely to be considered material in nature.
The language of the contract
In some cases, language is inserted into contracts to explicitly define what will be considered a material breach of contract. This makes it much easier to classify a breach as material, as it is not up to a judge to interpret the circumstances of the case and determine whether those circumstances meet the standard of a material breach.
For more information about what is considered a material breach of contract and how you should proceed if you have been affected by such a breach, contact a U.S. Virgin Islands contract lawyer.
Nash Davis is a member of the Corporate, Tax and Estate Planning Practice Group, a full service business law firm serving the U.S. Virgin Islands.