In New Jersey, as is the case in various other jurisdictions, legitimate and actionable breach of contract claims — whether between individuals or businesses (or any other entity) — rely on evidence of material breach.  Without a showing of material breach, the plaintiff in a breach of contract lawsuit cannot recover damages.

If you have sustained economic damages as a result of a breach of contract, you may be entitled to receive compensation (or in some cases to compel performance of the contract) for your various losses.  Breach of contract lawsuits must be filed in a timely manner, however, so make sure to connect with an experienced New Jersey corporate lawyer as soon as possible to discuss the legalities as they relate to your business entity.

The difference between material breach and immaterial breach can be difficult to understand for those unfamiliar with breach of contract litigation.  Oftentimes, those who feel that they have been “wronged” by the other party or parties to a contract (for failure to perform some duty under the contract) believe that this justifies litigation.  In reality, however, the conduct of the defendant(s) must be sufficiently material, or the lawsuit will not stick.

For now, a succinct explanation of materiality in the breach of contract context will help clarify the concept.

Materiality Basics

The issue of materiality is critical in the breach of contract context.  In New Jersey, same as other states, material breach justifies the cessation of all contract performance and a potential lawsuit in which the plaintiff may recover damages that resulted from such breach.  Material breach in New Jersey is a question of fact that depends on a holistic assessment of the circumstances of the case.  There are a number of criteria that the court will consider, however, in determining whether the breach was material.

These include:

• Whether (and to what extent) benefit deprivation resulted from such breach;
• Whether (and to what extent) the losses that resulted from breach can be compensated;
• Whether (and to what extent) the defendant will suffer forfeiture;
• Whether the defendant will correct their breach; and
• Whether (and to what extent) the defendant has acted consistently with standards of good faith and fair dealing.

Fundamental to the concept of material breach is whether an essential term, obligation, or duty of the contract has not been performed, or has otherwise been violated.  In other words, material breach occurs when the essential purpose of the contract has been defeated as a consequence of the breach.

This is a lot of legal terminology to take in at once, so let’s explore a quick example in which we weave some of these concepts together.

Imagine, for example, that you have entered into a contract with a small house-painting business to paint the outside of your residence.  You have a written contract with the business in which you clearly indicate the relevant terms of the engagement.  One of the requirements in the contract is that the paint must be a certain tone of red.  After several weeks, you return to the house and realize that it has been painted blue.  The defendant (painting business) argues that this is not a material breach, as they’ve painted your house and it’s a “nice color” and “suits the house.”

Can you sue?

In New Jersey, you would most likely be entitled to sue and recover damages (for any losses suffered as a result, such as finding a suitable replacement painter to redo the job and make it red).  Though the color may seem minor to the defendant, it is essential to the purpose of the contract.  The contract was not simply to paint the house — it was to paint it a particular tone of red.

Contact an attorney today to discuss your rights under the law.