As a business owner, you make contracts every day. Every time you buy or sell something, you likely made a contract, even if nothing was written down.
Indeed, most people make contracts daily. It is just part of our modern life.
In a perfect world, all of these contracts will consummate without any issues. Though, as we do not live in a perfect world, Chicago contract disputes can very well lead to business litigation.
Breach of contract
A common contract dispute that leads to business litigation is breach of contract. Breaches can take many forms, such as failure to perform entirely, failure to perform on time or failure to perform according to the contractual terms.
Material versus immaterial breach of contract
Chances are, even in your non-business life, you have dealt with a breach of contract, and you may deal with them weekly. However, not every breach of contract leads to litigation because some breaches are considered material and others are immaterial.
A material breach is one where a contractual term was violated, and the non-violating party incurred some damage as a result.
Conversely, an immaterial breach is usually a technical contractual violation where the non-violating party did not incur damages. In other words, the contractual violation did not hurt the non-violating party.
Most common example
The most common example of a material versus immaterial breach of contract occurs with vendor contracts.
For example, you purchase a bushel of oranges to be delivered by next Wednesday at 10:00am. If your vender delivers those oranges at 10:30am, that delivery was a technical violation of the contract.
However, whether or not this violation was material will depend on the contract itself and whether you incurred damages as a result.
If the contract makes it clear that the delivery time is “of the essence” or a material term, the violation alone can be material.
If you did not incur a damage as a result, you likely would no win anything at trial. On the other hand, if you did, then you could succeed at trial to recover.
For business owners, the key to avoiding contractual disputes is often just making better contracts. Make sure that both parties understand what the other party expects and needs.