Don’t define “material breach”

Some contract drafters define material breach in their termination provisions. They find “material” too vague on its own. That’s a mistake because defining the concept can limit your rights in ways you’ll eventually find unacceptable. And “material breach” is not vague, believe it or not.

angel & devil dispute material breachA contracting party needs the right to terminate for the other party’s “material breach”: for a breach so serious that the contract no longer makes sense for the injured party. But good luck listing all the breaches you might consider serious enough. You can certainly identify a few, but in most contracts, you can’t possibly predict everything or close to it. So if you limit termination to a defined list of breaches, you could lose the right to terminate for breaches that most people — and courts — would consider serious enough to justify termination.

Plus, clarity doesn’t demand a definition. The common law defines material breach far more thoroughly than you possibly could – through centuries of court decisions.

You could improve your contract by adding examples of material breach, without limiting the concept. “As used in Section __ (Termination for Cause), ‘material breach’ includes, without limitation …” With language like that, you gain certainty about some breaches without losing the concept’s breadth.

Of course, there’s no harm limiting the other party’s termination rights by defining “material breach.” Just don’t limit your own.

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