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What Constitutes Material Breach in Texas?

February 28, 2018 Posted in Blog

Determining whether a contract has been breached is fundamental to business disputes in Texas and elsewhere.  Oftentimes, breach of contract is not intended by either party.  In fact, the contract itself may be interpreted by the “breaching” party in such a way that the purportedly breaching conduct is not linked to the essential purpose of the contract.

In Texas, each party is required to perform their duties and obligations in accordance with a valid contract, unless their performance is excused or otherwise discharged by a material breach of said contract.  Materiality and immateriality can be confusing concepts for potential claimants who are inexperienced in the realm of contract litigation, but it’s a critical determination in most contract disputes.  Here at Berg Plummer Johnson & Raval, LLP, a Houston business contract attorney can help you sort through and evaluate the materiality of such breach.

Put simply:

If a breach is immaterial, then the contract will continue as valid.  If a breach is material, then the non-breaching party may terminate the contract if they so please and may be entitled to sue the breaching party for damages.

Whether a breach is material depends on a number of different factors.  Let’s explore some of the basics.

Texas Materiality

Breach occurs when one of the parties involved in the contract fails to perform one of their duties or obligations under the contract (assuming that the failure to perform is not excused by some other mechanism).  Importantly, not all breach is significant enough that it will terminate the contract or excuse the other parties from having to perform their duties under the contract at-issue.  Thus, the issue of “materiality” is front-and-center.

Materiality of a breach is a question for the jury and is a fact-based determination (though there are some breaches, such as the failure to perform contractual duties in a timely manner, that may be deemed “material” by the court, as a matter of law).  In Texas, a contract is materially breached if the essential purpose of the contract has been contravened, or if the bargained-for benefits of contractual performance have been deprived as a result of breach.

A number of different factors influence the determination of materiality, including but not limited to: the amount of losses and whether it can be compensated, whether the breaching party acted in good faith, and if there has been a deprivation of contractual benefits.

Consider the following example:

Imagine that you have entered into a service contract with a musician to perform at your entertainment venue.  The musician is intoxicated at the time of the performance, and gives an underwhelming performance overall, though the set was completed without any further complications.  The crowd leaves fairly unsatisfied.

Whether the musician breached their contract is a question of fact.  Arguably, the musician violated the “spirit” of the contract by showing up intoxicated, but if they performed their set to completion, then — even if the performance was below-par — it could be reasonably argued that the musician did not materially breach their contract.  Further, a court would likely find that the losses were not so significant, as customers already paid to see the musician (and would not blame the venue for the musician’s behavior), and the musician would not easily be able to compensate you as the losses are not distinct and identifiable.

Contact an Experienced Houston Business Contract Attorney Today

Whether you have suffered losses due to a breach of contract or are currently being sued on the basis of a purported breach of contract, it’s vital that you connect with a qualified attorney as soon as possible so that the claims at-issue can be properly evaluated.  Get in touch with an experienced Texas contract attorney here at Berg Plummer Johnson & Raval, LLP for assistance with your upcoming lawsuit.

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