Incumplimiento material del contrato
What is a ‘material’ breach of contract by a party to a commercial contract? This is a critical issue regularly considered by the courts – and one that exercises clients and lawyers alike in the course of their work. The commercial team at Herrington Carmichael LLP solicitors are highly experienced in drafting and interpreting contract clauses.
What is a ‘material breach’?
The phrase ‘material breach’ has no set legal meaning unless given one in a contract. Otherwise the meaning in a particular case will be decided by the courts taking in to account factors including the intention of the parties who have used the expression in an agreement.
Over the years the courts have given guidance in commercial cases. One judgement held that a breach may be ‘material’ if it is “serious in the wide sense of having a serious effect on the benefit which the innocent party would otherwise derive”. Another judgment has stated that a material breach “connotes a breach of contract which is more than trivial, but need not be repudiatory” (a breach is repudiatory when it is so serious that it allows the contract to be terminated by the innocent party – analysis is required on a case by case basis in respect of the seriousness of the issues experienced in the context of the contractual arrangement).
When considering whether there has been a material breach, the parties’ primary focus must be on the character and gravity of the breach and its overall impact on the innocent party.
What constitutes a material breach?
A material breach will generally be a breach that is substantial and serious, rather than a matter of little consequence.
The courts have ruled that a series of minor breaches of a contract could constitute material breach.
In reality, contractual parties often have different views on what constitutes a material breach. The impact on the parties of a material breach is potentially significant and where a dispute cannot be resolved, the court will be asked to rule on whether or not a material breach has occurred.
Rather than relying on the courts to assist in defining the term “material” breach, contract drafters may choose to provide a definition of the breaches which would be considered ‘material’ in the context of that particular contract – this is often done where a contractual provision is of particular importance or concern to a client. Sometimes contract drafters prefer not to define the phrase ‘material breach’, instead relying on the flexibility of the interpretation that will be applied by the courts should a dispute arise.
What are the remedies?
Commercial contracts often include a clause allowing an innocent party to terminate the contract in the event of a material breach. These clauses should be carefully drafted to minimise the risk of a future dispute on their terms.
In the absence of an express (and properly drafted) term, a proven material breach will often entitle the innocent party to claim damages for losses arising as a result of the breach and trigger rights to terminate the contract. However, demonstrating that a material breach has occurred can be a difficult and costly process.
What do you need to prove?
Whether there has been a material breach is a question of fact. Unless there has been a total breakdown in the relationship, it is potentially unwise to seek to terminate the contract because the other party may argue that the purported termination is, in itself, repudiation of the contract. The consequences could be a substantial claim for damages against the person alleging the breach. There may be other less risky courses of action available to the innocent party, and if handled well it may be possible for the parties to continue to work together.
How can we help?
If you or your business are party to a commercial contract or you are considering entering in to a commercial contract, and you would like to understand its terms and what they mean in practice, contact us for expert advice before taking further action.
The team of commercial solicitors at Herrington Carmichael LLP are experienced in commercial contracts. We pride ourselves on our understanding of each client’s business and offering plain speaking quality legal advice suited to its unique requirements.
For further help and advice, contact Mark Chapman on 01276 686222
Esto refleja la ley en la fecha de publicación y está escrito como una guía general. No contiene asesoramiento jurídico definitivo, que debe buscarse según corresponda en relación con un asunto particular.
Latest Commercial Law Insights
Applications opened on 20 Mayo 2020 for the government’s £250million Future Fund loan scheme…
If you are unsure of what the requirements are or whether you are meeting those requirements, or maybe you would just like some assistance…
La pandemia de COVID-19 está ejerciendo presiones financieras en las empresas de la mayoría de las industrias.
La pandemia COVID-19 ha ejercido y sigue ejerciendo una presión extrema sobre los recursos de las empresas de todos los tamaños.
Commercial Law Podcasts
At the Legal Room UK we will be using a diverse range of our specialist lawyers and business friends to bring you expertise and insight on a variety of topics on a range of topics from commercial law, to property law, employment law and more.
All our podcasts are for general information and are not to be taken as bespoke legal advice.
El premiado asesoramiento legal
Somos abogados en Camberley, Wokingham y Londres. En 2019, Herrington Carmichael ganó el premio a la "Firma de abogados de propiedad del año" en los premios de propiedad de la revista Thames Valley Business, "Mejor empresa mediana" en los premios de negocios de Surrey Heath y fuimos nombrados "Miembro del año" de IR Global. Estamos clasificados como una Firma Líder 2020 por Legal 500 y Alistair McArthur está clasificado en Chambers 2020.