When a Breach of Contract Isn’t Enough

In law, one simple word can make a huge difference. That’s not just in law, but in how your business operates, and how its contracts and agreements are interpreted. But a disturbing trend in the law may be making it harder for you to enforce your business agreements and contracts, simply because of the addition of a single word.

Breach of Contract Cases

At their core, actions for breaches of contract are straightforward; it requires proof of the agreement, a breach of the agreement, and damages. You don’t need a law degree to understand that someone who violates their written or oral promises can be liable for damages.

And your business likely engages in many contracts, and may rely on others complying with their agreements to hire or pay your business, or to provide it vital goods or services. But what if you learned that breaching your agreements may not be enough for you to take them to court and sue them for damages?

New Requirements

The problem is that somehow, throughout the past few years, Florida courts have snuck a new word into their breach of contract cases. That word is “material.” Many courts have written that to prove a breach of an agreement, a person seeking to enforce the agreement must show not just that the agreement was breached, but that there was a material breach.

In other words, just proving a breach of the agreement may not be enough to enforce an agreement. You may now need to show that a condition that went to the heart of the agreement, or which was a fundamental understanding of the parties, was breached.

In many cases, this may be easy. If a vendor promises to pay you for goods or services and doesn’t, payment is a material term of the agreement, so there should be no problem showing that the breach was material. But in many cases, more complex agreements, with multiple duties, provisions and requirements, may lead to breaches where materiality is in question. Not every provision in an agreement may be material, and thus, business owners may now have to worry if a breach that’s material to them will be considered material by the court.

Solutions To Consider

There may be a workaround to the problem. Any agreement can include a provision with language that says that certain terms—or all of them—are material, or which otherwise waives any defense that any party may have to non-materiality. The written agreement between the parties may override any pre-existing laws that require materiality.

You may also want to consider language explaining why certain terms are important. For example, if your agreement requires that you be emailed records every Friday, or requires that someone paint inventory green before shipping it to you, some language in the agreement explaining why this is important, or the purpose it serves, can help you avoid a materiality problem.

Make sure your agreements are in compliance with current legal requirements. Contact Tampa business attorney David Toback to discuss protecting your business and to review its documents.

Resource:

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