Material Breach of Contract in New York Elements

When another party commits a material breach of contract in New York, can you terminate the agreement and sue for damages?

What is a material breach of contract?

A material breach of contract is significant and prevents the main purpose of the contract from being performed and realized.

Can the non-breaching party cease performing their end of the contract?

Under New York law, the answer is yes, a non-breaching party can cease performing their obligations under the contract if the other party performs a material breach. If the other party commits a minor breach, however, then the non-breaching party is still obligated to perform their end of the contract. A minor breach is a less important aspect of the contract and does not overall affect the main purpose of the contract. Either way, the non-breaching party has the right to sue the breaching party for damages.

How does a New York court decide if a material breach of contract occurred? The court looks at these elements:

1. There must be a contract between two or more parties.
2. The injured party must have performed their end of the contract.
3. There must be a material breach of contract, a breach that goes to the root of the agreement.
   1. 1.  Was the injured party deprived of a benefit that they had reasonably expected to receive?
      2. To what extent could the injured party be reasonably compensated for this missed benefit?
      3. Did the breaching-party offer to rectify the situation or suffer forfeiture?
      4. Is the breaching-party’s offer to rectify the situation or suffer forfeiture an adequate solution?
      5. Was the breaching-party’s conduct and intentions (offer to perform and or failure to perform) in good faith and fair dealing?
4. The material breach of contract must cause the injured party damages.

When a court decides on a case of a materiel breach of contract, they take into account the intentions of the breaching-party and the extent to which the breaching-party could correct the breach.

If the breaching-party had intended to misguide the plaintiff, the court may judge them more harshly than if the breach was non-intentional. For instance, if a company sold a product that was marketed as eco-friendly and they knew if was not eco-friendly and that it could not be made to be eco-friendly, then the customers that specifically bought the product because it was advertised as eco-friendly, could argue a material breach of contract occurred and they could sue for damages.

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