What Is a Minor Breach or a Material Breach of Contract?
By Justin Kaplan, Attorney at Parikh Law Group
Contracts form the backbone of both individual and business relationships, providing clarity and security in transactions and interactions. However, not every contract dispute escalates to a catastrophic fallout; the severity of a breach can vary. Parikh Law Group, LLC, a renowned legal firm in Chicago, proficiently handles these matters, ensuring clients’ interests are protected whether the breach is minor or material.
What Constitutes a Breach of Contract?
A breach of contract in Illinois occurs when one party fails to perform any term of the contract without a legitimate legal excuse (735 ILCS 5/2-301). This includes not completing a job, not paying in full or on time, not delivering goods sold, or any act that shows the party will not complete their duties. The breach can be categorized either as minor or material, and this classification influences potential legal remedies. Here’s a closer look at each type:
Minor Breach of Contract
A minor breach, also known as a partial breach or an immaterial breach, occurs when the breach does not substantially undermine the contract as a whole, and the essence of the agreement is still fulfilled. An example is when a contractor completes a job late but the final work meets the agreed specifications. In Illinois, the law typically allows the non-breaching party to recover damages for any losses incurred due to the breach but does not usually permit contract termination (Howard v. Firmand, 378 Ill.App.3d 147).
Material Breach of Contract
Conversely, a material breach significantly affects the value of the contract and impacts the core of the agreement. This type of breach occurs when one party’s failure to perform their obligations renders the agreement irreparably broken, depriving the other party of the substantial benefits they were to receive.
For example, if a supplier fails to deliver essential components as contracted, and as a result, the buyer’s production line stops, this is likely considered a material breach. Under Illinois law, the non-breaching party is generally entitled to terminate the contract and seek broader damages, including compensation for lost profits and additional costs incurred from having to replace the supplier (R.J. Management Co. v. SRLB Development Corp., 346 Ill.App.3d 957).
Consequences & Remedies for Breach of Contract
In Illinois, the legal consequences and available remedies for a contract breach depend crucially on whether the breach is deemed minor or material.
In instances of a minor breach, where the breach does not substantially diminish the overall value of the contract, the non-breaching party has the right to enforce the terms of the contract and compel performance from the breaching party. Additionally, Illinois law allows for the recovery of actual damages.
These damages are intended to compensate for the financial losses directly attributed to the breach, as outlined in cases like Universal Builders, Inc. v. Moon Motor Lodge, Inc., 430 F.2d 153. This compensation typically covers the difference between the contracted performance and what was actually received.
A material breach, on the other hand, offers the non-breaching party more significant legal options due to the severe impact of the breach on the fundamental terms of the contract. The non-breaching party may opt to terminate the contract, freeing all parties from their obligations. Moreover, they are entitled to seek further legal recourse to recover damages for the expected benefits of the contract.
This can include not only direct damages but also consequential damages if they were foreseeable and directly connected to the breach, as demonstrated in Haisma v. Edgar, 218 Ill.App.3d 78. In some circumstances, equitable remedies such as an injunction might also be pursued to either prevent further losses or to enforce performance in alignment with the contract terms.
For individuals and businesses in Illinois dealing with potential contract disputes, understanding these distinctions and the applicable state laws is critical. Consulting with knowledgeable Chicago corporate lawyers can provide crucial guidance and representation to ensure that contractual rights are protected and enforced effectively.
Parikh Law Group, LLC: Your Trusted Chicago Business Law Firm
At Parikh Law Group, LLC, our team of skilled Chicago business lawyers has extensive experience in drafting, reviewing, and enforcing contracts. We can help you understand your rights and obligations under a contract, advise you on how to handle potential breaches, and represent you in court if necessary.
Contact us today to schedule a consultation and discuss your specific business needs.