“Material Breach”

In my tireless quest to master all things related to materiality, I recently asked myself what the heck material breach means. I suspect that if you were to ask that question to a random sample of lawyers and business people, you’d mostly get a lot of hemming and hawing.

By extrapolating from my analyses of material and material adverse change (the most recent being the third article in this issue of Deal Lawyers), I came up with the definition of material breach contained in the following provision:

2.3 Termination for Breach. If either party commits a Material Breach of its obligations under this agreement, the other party may terminate this agreement by giving the breaching party at least ten days’ prior notice, except that any such notice will not result in termination if the breaching party cures that breach before the ten-day period elapses. For purposes of this agreement, “Material Breach” means, with respect to a given breach, that a reasonable person in the position of the nonbreaching party would wish to terminate this agreement because of that breach.

What do you think?

I have in mind that this definition would apply only in the context of termination. When it comes to remedies, if you want to incorporate a significance qualifier, you’d probably want it to express a lesser level of significance, so you wouldn’t want to use the word material.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.