Common Law Breach

What is a breach of contract?

When performance of a duty under a contract is due, any unjustifiable non-performance is a breach.

What are the levels of breach?

• Substantial Performance

• Material Breach

• Total Breach.

What is Substantial Performance?

An Immaterial (partial breach). Occurs when there are trivial insignificant deficiencies in the quantity or quality of performance.

Under substantial performance, how can a nonbreaching party react?

• Non-breaching party may not suspend performance or termiante the K. They must still perform.

• They may sue for money damages for any harm the partial breach causes.

How are damages measured under substantial performance/

Ordinarily it reflects the cost to remedy the defective performance.

How do you determine substantial performance?

• Involves a materiality analysis and determining, using the multi-factor material breach test under Rest.2d §241.

What is a material breach?

Failure to perform a significant performance obligation.

How may a nonbreaching party react to a material breach?

A nonbreaching party may suspend performance while giving the breaching party a reasonable amount of time to cure defective performance.

This does not immediately discharge nonbreaching parties duties, and if non breaching party does decide to suspend performance prematurely then they may be considered the breaching party instead.

What is the materiality analysis that is used to determine a substantial or a material breach? (Analytical Framework) What are the elements?

A breach is material when it goes to the essence of the contract and substantially deprives the non-breaching party of the benefit they reasonably expected. Courts consider several factors to determine materiality breach, including:
(1) the extent to which the injured party is deprived of the expected benefit;
(2) the adequacy of compensation for the loss;
(3) the extent to which the breaching party will suffer forfeiture;
(4) the likelihood that the breaching party will cure the failure; and
(5) whether the breaching party acted in good faith and in accordance with fair dealing.
(Restatement (Second) of Contracts § 241).

Element 1: What is deprival of benefit?

Did the breach deprive the non-breaching party of what they reasonably expected to get? If yes then there may be a breach.

Element 2: What is adequacy of compensation?

Can the non-breaching party be compensated for their loss with money damages

What is Element 3: Forfeiture to the breaching party?

Would labeling this breach “material” cause an unfair loss (forfeiture) to the breaching party?

What is Element 4: Likelihood of Cure?

Is the breaching party likely to fix the breach quickly and reasonably?

What is element 5: Good Faith and Fair Dealing?

Was the breaching party acting in good faith?

What is Notice & Cure

The injured party must give notice of material breach and an opportunity for the breaching party to cure it.

• Most written contracts include notice & cure provisions because most courts will require them anyway.

• Failure to provide notice and cure opportunity may turn the non-breaching party into the breaching party.

What is Total Breach

An uncured material breach.

• A material breach becomes total when it is not reasonable to make the nonbreaching party wait any longer or when breaching party has failed to cure.

What is the rule for determining whether the opportunity to cure has passed giving rise to a total breach?

Result of Delay: Does the delay harm the non-breaching party’s ability to make substitute arrangements?

If performance without delay important?

How may the nonbreaching party react to a total breach?

Non-breaching party may withhold performance and consider her duties discharged.

Terminate the K and

Sue for damages.