What Constitutes a Material Breach of Contract?

In Nevada, to prevail on a claim for breach of contract action must show (1) the existence of a valid contract, (2) a breach by the defendant, and (3) damage as a result of the breach.[1]  For a breach of contract to be material, it must go to the root or essence of the agreement between the parties, or be one which touches the fundamental purpose of the contract.[2]

Stated another way, it is a breach which is so substantial or fundamental as to defeat the object or purpose of the entire transaction, or make it impossible for the other party to perform under the contract.[3]  In Nevada, material breach of contract “depends on the nature and effect of the violation in light of how the particular contract was viewed, bargained for, entered into, and performed by the parties”[4]

Each alleged breach must be viewed in light of what was bargained for, whether the failure to perform went to the very root of the Agreement, and touched on its fundamental purpose.[5]  A breach is not material unless it manifests a failure of performance of a duty that actually arises or is actually imposed by the Agreement.[6]

[1] Brown v. Kinross Gold U.S.A., Inc., 531 F. Supp. 2d 1234, 1240 (D. Nev. 2008) (quoting Saini v. Int’l Game Tech., 434 F.Supp.2d 913, 920–21 (D.Nev.2006) (citing Richardson v. Jones, 1 Nev. 405, 405 (1865)).
[2] 23 Williston on Contracts § 63:3 (4th ed.).
[3] 17B C.J.S. Contracts § 753.  Further, the Restatement (Second) of Contracts § 241 (1981), suggests five factors for consideration when determining materiality: 1) The extent to which the injured party will be deprived of the benefit that it reasonably expected; 2) The extent to which the injured party can be adequately compensated for the part of that benefit of which it will be deprived; 3) The extent to which the party failing to perform or to offer to perform will suffer forfeiture; 4) The likelihood that the party failing to perform or to offer to perform will cure its failure, taking account of all the circumstances, including any reasonable assurances; and 5) The extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
[4] J.A. Jones Const. Co. v. Lehrer McGovern Bovis, Inc., 120 Nev. 277, 294, 89 P.3d 1009, 1020 (2004) (quoting Stone Forest Industries, Inc. v. U.S., 973 F.2d 1548, 1550–51 (Fed. Cir.1992)).
[5] Id.
[6] Onyx Las Vegas, LLC v. Tropicana Inn Inv’rs, LLC, 126 Nev. 744, 367 P.3d 806 (2010) (quoting Bernard v. Rockhill Dev. Co., 103 Nev. 132, 135, 734 P.2d 1238, 1240 (1987) (quoting Malone v. University of Kansas Medical Center, 220 Kan. 371, 552 P.2d 885, 888 (Kan.1976)); FDIC. v. Air Florida System, Inc., 822 F.2d 833, 840 (9th Cir.1987))).



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