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By Sanjeev Kumar
Founding Attorney

Contracts are an integral and unavoidable part of doing business. As such, it is critical that business owners have at least a basic understanding of what goes into creating a strong business contract and what can happen when a contractual relationship does not work out. For example, knowing about what constitutes a material breach of contract can be invaluable to a business owner. A material breach is one that goes to the heart of a contract between two parties. It is one that renders the contract irreparably broken and one that essentially disregards the whole purpose behind establishing the contract in the first place. In the event of a material breach by the other party, a business owner has the right to terminate the agreement. Furthermore, the business owner can seek damages caused by the breach.

How to Prove a Material Breach of a Business Contract

In order to prove that a material breach of a business contract has occurred, you must be able to show evidence of that material breach. Evidence of a material breach can come in many forms and works to support the assertion that the contract has been rendered useless for all intents and purposes of the parties involved. For example, the contract itself will be a central piece of evidence in a breach of contract case. Look to what the contract says. Oftentimes, the contract itself will provide guidance on what a material breach would look like. Even more specifically, the parties to the contract may have provided stipulations which dictate which provisions would constitute material breaches if violated.

The court will also look to what type of loss has been suffered as a result of the breach and whether the effects of the breach created problems that could still be solved. The less likely a problem created by the breach is likely to be solved, the more likely it was a material breach. The timing of the breach will also be important in deciding whether or not a material breach has occurred. If most of the contract has already been performed, the loss of the nonbreaching party is likely to be less. It is less likely that the breach will be found to be material and, therefore, is not likely to be canceled.

Despite any breach occurring, proving a material breach will also require demonstrating the likelihood that the breaching party is still ready, willing, and able to perform the contract. If the breaching party is still likely to try and fix the problems caused by the breach and work towards performing the contract to completion, the less likely it is that the court will find that a material breach has occurred. To counter any assertion that the breaching party is still willing and able to perform the rest of the contractual obligations, you could show things like the breaching party’s financial situation to show that they are unable to fulfill their contractual obligations.

Business Law Attorney

Are you having a problem with your business contracts? The Kumar Law Firm can help review the terms of the contract and counsel you on your options going forward. Contact us today.

About the Author
Sanjeev Kumar is the founder and principal at the Kumar Law Firm, which provides a wide range of legal services to entrepreneurs and business owners in the area of business & corporate law and intellectual property along with related areas of interest to clients such as business succession planning, wealth preservation through estate planning, and alternate dispute resolution.