The Difference Between “Material” and “Immaterial” Contract Breaches
April 10, 2023
Running a business involves developing ties with other people and business entities. Of course, you need customers, but you will also often need suppliers, service providers, and professional assistance. In other words, to keep your business operating, you will need to forge agreements to help you in the operation of your business. These agreements will usually be a contract, whether it’s oral or in writing.
A contract requires both parties to live up to what’s been agreed upon. For instance, you, as a retail store operator, would most likely have to enter into contracts with suppliers to bring you the products to sell. In return, you generally must pay them for those products. The contract the two of you agree to requires both sides to fulfill their obligations.
For example, Supplier A must deliver 100 widgets every other Tuesday, but suddenly the shipment stops. This can be considered a breach of contract as the vendor failed to deliver the goods. However, the supplier contacts you and says that due to weather conditions, the shipment will be delayed until the week after. Is this still a breach?
In legal terms, there are immaterial or minor breaches and material breaches. A week’s delay would no doubt be considered an immaterial breach, but if the shipments stopped altogether or for a substantial period of time and put your business in jeopardy, that would be considered a material breach. Material breaches can lead to lawsuits if not resolved in negotiations.
If you’re involved in a contract dispute in or around Troy, Michigan, contact me at the Redmond Law Group. I am a business attorney with extensive knowledge of contracts, and their enforceability, and will help you resolve the situation, even if it requires courtroom action. I also proudly represent clients throughout Oakland and Macomb counties, Michigan.
Contract Law in Michigan
An oral contract carries the same weight as an express or written contract. The problem is, if matters do end up in court, both parties may have different recollections – or versions – of what was agreed upon. A well-crafted express contract is always the best way to go.
Under Michigan law, several elements are required for a contract to be valid. First, there must be an offer and acceptance. Using the above example, the storeowner orders 100 widgets every other Tuesday. and Supplier A agrees to do so. Then there must be what is called consideration. The storeowner must offer something in return for the widgets, a cash transfer, in most cases.
Mutuality of obligation is another consideration. This means that the contract cannot be one-sided, favoring one party overwhelmingly over the other. For instance, you can’t offer one dollar for 100 widgets, which has cost the supplier hundreds or thousands of dollars to make.
Finally, there must be competency and legality. You cannot enforce a contract to sell illegal drugs or contraband, for instance. Also, both parties must be 18 or older and be of sound mind. If you agree to a contract under duress or while you’re intoxicated, competency to do so would be lacking.
Material vs. Immaterial Breaches
As noted, a breach occurs when one party fails to live up to its agreed-upon obligation. Also, as discussed, breaches can be major or minor, material or immaterial. Generally speaking, an immaterial breach is not something that would end up in litigation but would require negotiations or at least discussions between the parties. Say Supplier A delivers only 50 widgets because of supply chain issues. He is doing his best to live up to the contract. That could be considered minor.
Now, if Supplier A finds someone who will pay more for the widgets and quits delivering to you, the storeowner, then you would have suffered a material breach, which could definitely lead to legal action. This brings up another aspect of a material breach. It generally involves a financial loss for one of the parties involved, while an immaterial breach might just cause a disruption or momentary interruption in business operations.
Retain Skilled Representation and Advocacy
When a contractual agreement goes wrong, you should seek legal counsel immediately. Even what may seem like a minor breach can morph into a major one if you don’t take action quickly. If you’re in or around Troy, Michigan, contact me at the Redmond Law Group.
I will assess the situation with you and advise you of your best options going forward. I can help you negotiate a resolution or even take matters to court if necessary. Reach out with all your questions and concerns about the contracts you’re involved in, or intend to be involved in.