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What exactly is breach of contract?

As a New Jersey business owner, you likely deal with contracts on a daily basis. You deal with your customers, your suppliers, your distributors, even your landlord by means of contracts.

Ideally, all of your contracts exist in written form and spell out in sufficient detail what both parties will do and not do to fulfill the contracts. This makes them easier to enforce should the other party breach the contract.

Two breach types

FindLaw explains that a breach of contract can be either material or immaterial. As you might expect, a material breach is serious and negatively affects one of the parties in a substantial manner. These are the types of breaches that often result in contract disputes and litigation's since one party has suffered damage. Conversely, an immaterial breach generally represents an action or lack thereof by one contract party that fails to substantially damage the other party.

Illustrative examples

Suppose, for instance, you own a florist shop and you have a contract with a supplier that calls for him or her to deliver 5,000 roses to you on or before a particular date. Suppose further that your supplier does not deliver the roses for whatever reason. Is this a material breach of contract or an immaterial one? The answer depends on the circumstances.

If your contract calls for delivery of the roses by February 13, this means that you undoubtedly wanted them to sell to your Valentine's Day customers. You may even have put signs in your windows and/or taken out TV or radio ads announcing the special you intended to run on Valentine's Day roses. Without the promised roses, you stand to lose a good deal of business, not to mention making your customers angry to the point where they may make false advertising claims against you. Your supplier's failure to live up to his or her end of the contract consequently damages you substantially and represents a material breach of the contract.

Now suppose that your supplier delivers only 4,800 roses to you instead of the 5,000 called for in the contract. Assuming that you do not run out of roses on Valentine's Day, the missing 200 roses do not really affect your business much, if at all and you suffer little or no damages. In this situation, your supplier's failure to deliver the total number of roses called for in the contract amounts to an immaterial breach of contract.

This is general educational information and not intended to provide legal advice.

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