In Compass Group UK and Ireland Ltd v Mid Essex Hospital Services NHS Trust (2013) LJ Jackson stated the phrase ‘material breach’ “connotes a breach of contract which is more than trivial, but need not be repudiatory….In Crosstown Music Company 1, LLC v Rive Droite Music Ltd (2009) the court considered that the concept of materiality, as opposed to triviality, has to be measured in the context in which the question arises – that is, the total factual matrix, covering the terms of the contract and the circumstances of the case.(It was relevant, in that case, that Celtech was on the brink of insolvency.) In Dalkia Utilities Services Plc v Celtech International Ltd (2006), the High Court ruled that failing to make three consecutive monthly payments constituted a material breach of Celtech’s obligations, as the combined total was “neither trivial nor minimal”.In National Power Plc v United Gas Co Ltd (1998), the court held that a material breach of contract was a breach that has a serious effect on the benefit that the innocent party would have otherwise derived from the contract.Over time, the courts have adopted a varied approach to interpreting materiality: Meaning will therefore be a question of interpretation, on a case by case basis. There is no universal legal definition for material breach of contract.
But what constitutes a ‘material’ breach?īreach of contract and materiality: Key principles To allow termination, as opposed to just financial compensation, for breaches which are less drastic than repudiatory breaches, but that nevertheless still have a significant impact, parties often agree express terms providing for termination in the event of a material breach of contract. (Such a breach is also known as a repudiation, or a repudiatory breach.) The basic, common law position is that a contract can only be terminated if the actions of a breaching party go right to the core of the contract and substantially deprive the innocent party of the benefit the contract was intended to confer. In this briefing, Gwendoline Davies, Kieran Craddock and Ryan Doodson explain how the approach adopted by the courts can offer practical assistance for contract negotiators and commercial parties. The issue crops up often in commercial disputes. Whether a breach of contract is ‘material’ (or ‘substantial’ – in this context, the terms are generally interchangeable) can be difficult to ascertain.īut the answer can have a major impact on the consequences flowing from such a breach.
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