Material breach is a contract law term which refers to a failure of performance under the contract which is significant enough to give the aggrieved party the right to sue for breach of contract. When there has been a material breach, the aggrieved party is also relieved of a duty of further performance under the contract. However, a minor divergence from the terms of the contract is not a material breach. A material breach is one that is significant enough to destroy the value of the contract.
A lawsuit for material breach of contract is a civil action and the remedies awarded are designed to place the injured party in the position they would be in if not for the breach. Remedies for contractual breaches are not designed to punish the breaching party.
The following circumstances are important to determine whether a failure to render or to offer performance is material:
1. The extent to which the injured party shall be deprived of the benefit or profit which s/he reasonably expected;
2. The extent to which the injured party can be adequately remedied or compensated for the part of that benefit of which s/he shall be deprived;
3. The extent to which the party failing to perform or to offer to perform shall suffer forfeiture;
4. The likelihood that the party failing to perform or to offer to perform shall correct such failure, taking account of all the circumstances including any reasonable assurances; and
5. The extent to which the behavior of the party failing to perform or to offer to perform is according to the standards of good faith and fair dealing.