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All about contract disputes, including how to avoid them – part 3
Material vs. Non-Material Breach of Contract (continued)
Did the breaching party act in bad faith?
If the breaching party willfully broke the contract, or if the breach resulted from deceit, unfair dealing, or fraud, then the court will likely find the breach material. On the other hand, if the breach was due to circumstances beyond the control of the breaching party, the court will be less likely to find the breach material.
Is the non-breaching party ready, willing, and able?
In order for a breach of contract to be material, the non-breaching party must either have already performed their obligations under the contract, or be ready, willing, and able to do so.
Does the contract have provisions for material breach?
Some contracts will specify what constitutes a material breach. Of course, if you’re dealing with a breach of contract, it’s a good idea to read the entire contract again.
Anticipatory breach or repudiation
As soon as the breaching party indicates that it either can’t or wont perform its obligations under the contract, the non-breaching party can claim material breach. This is called an anticipatory breach, or repudiation of the contact. In order for the courts to agree with the claim of material breach by the non-breaching party, the breaching party must have demonstrated that they were not going to honor the contract either through their words or actions. However, if the repudiation is verbal, it must be direct and unambiguous. Basically, the breaching party has to say they’re not going to honor the agreement. Any actions that make fulfilling the agreement impossible also satisfy the criteria for repudiation.
Check back soon for All about contract disputes – including how to avoid them, part 4. In the meantime, check out our page on contract disputes.