What is a Breach of Contract?
In Minnesota, a breach of contract occurs when a party to the contract does something that is prohibited by the contract, or fails to do something that is required by the contract.
There are breaches, and “material” breaches. Something is “material” if it is an important part of the contract.
In an employment contract, paying the employee is an important part of the contract. Payment is material. If the contract says that the employee will email the employer the hours the employee worked each week in a Microsoft Word document, but the employee emails it in a Microsoft Excel document instead, that is probably not an important part of the contract. The format could be, but probably is not, material. It would depend on the intentions of the parties.
What Happens if the Contract is Breached?
Breach of a contract entitles a non-breaching person to damages. However, a “material” breach by one party excuses the other party from his or her requirements under the contract.
Again, something is material if it is an important part of the contract. A “material” breach is a breach of an important part of the contract. The action or inaction causing the breach must be “material” in order to excuse the non-breaching person from his or her requirements under the contract.
If there is a material breach, the non-breaching person may choose to affirm the contract and obtain a damage award to put him or her in the position he or she would have been in if the breach had not occurred, or the non-breaching person may chose to rescind the contract and be restored to the position he or she would have been in if the contract had never been made.
Many contracts, however, contain many promises or agreements. If the breached promise in a contract may be detached from the other promises, the non-breaching person may not be excused from these other promises.
When is a Breach a “Material” Breach?
A “material” breach has been defined as “a substantial failure in performance” or a failure to perform a “primary purpose” of the contract.
Examples of a Material Breach
An example of a material breach may found in an employment contract where I promise to dig a hole in your yard so you may plant a tree, and put that dirt in your trash can, and you promise to pay me for this work.
If I do not dig the hole, but put dirt from my garden in your trash can, I would have materially breached the contract. However, if I dig the hole for your tree and take the extra dirt home, that may or may not be a material breach of the contract. If all that we intended was for me to get rid of the dirt for you, taking it home instead of putting it in your trash can would not be a material breach. However, if we intended to put the dirt in your trash can for your use at a later time, taking it home instead of putting it in your trash can would be a material breach.