material breach

Should I file a breach of contract lawsuit?

Everyday we enter into agreements and almost all of these agreements go according as planned. However, inevitably the situation arises where the other party has breached your contract or you have been falsely accused of breaching the contract. When such a situation arises, it is helpful to understand what a breach of contract is and whether it is worth it to pursue such a breach in a Utah court.

What is a Breach of Contract?

A breach of contract occurs when a party to a contract fails to perform to the terms of that contract. Generally a breach of contract is easy to identify but when it comes to litigation it may not be so clear. In a lawsuit the dispute usually comes down to the wording of the contract or whether the parties even entered into a contract. While a contract may have been breached, it may not be worthwhile to sue over that contract unless the breach is "material".

What is a Material Breach?

material breach is a breach so substantial that it causes great damage or justifies the other party's refusal to perform the contract. For example, if Bob agrees to buy a car from Sam for $10,000 but Sam fails to deliver the car to Bob, then Bob is justified in not paying Sam the $10,000. Sam's failure to deliver the car would be an example of a material breach.

In contrast, a non-material breach usually occurs when the damage is slight or non-existent or there is no legitimate excuse for not performing the contract. For instance, Paul agrees to finish painting the exterior of Henry's home by August 1st but only manages to finish the job by August 3rd. Here, although Paul has breached the contract, Henry's damages are minimal (assuming there was no specific reason it needed to be completed by the 1st) and Henry is not justified in refusing to pay Paul (assuming the painting was done as specified). Thus, Paul's breach is non-material.

If a breach is non-material then it usually does not make sense to pursue a breach of contract action. As a result, it is important to determine whether the breach was material and whether there are damages.

What damages can be recovered from a breach of contract?

There are generally two types of recoverable damages available in a breach of contract action: general damages, which flow naturally from the breach, and consequential damages, which are damages that were reasonably foreseeable by the parties at the time the contract was entered into.
General damages are usually easy to identify and recover while consequential damages are more difficult. To recover consequential damages the non-breaching party must prove: the damages were caused by the breach; the amount of damages are reasonably certain; and the damages were within the contemplation of the parties when the contract was entered into. Before pursuing a breach of contract action it is critical that the recoverable damages are identified so that it can be determined whether it is worth it to commence a lawsuit.

If you need help evaluating your breach of contract action, schedule a free consultation with J.Cutler Law.