As a Michigan entrepreneur and business owner, you probably are a party to many contracts, such as with your suppliers, distributors, customers, etc. And with any luck at all, you have never faced the necessity of suing one of the parties for breach of contract.

Per FindLaw, contract breaches can take two forms, material and immaterial. Both forms involve the other party failing to live up to the contract’s terms, but you suffer considerable damages in a material breach, whereas you do not in an immaterial breach. Consequently, you can sue someone for materially breaching his or her contract, but not for merely immaterially breaching it.

Breach examples

The easiest way to understand the difference between a material breach and an immaterial one is by considering the following two examples. The underlying supposition for each is that you own an electronics store that sells, among other things, high-end plasma TVs, your supply of which is getting low. So you order 50 more from your favorite supplier who agrees to deliver them within one week. But (s)he fails to perform the contract and delivers the TVs to you four days late. Obviously that constitutes a breach of contract, but is it material or immaterial? That depends on why you ordered the TVs and the provisions of the contract.

In the first example, your only purpose in contracting with your supplier for delivery of 50 TVs was to replenish your dwindling supply. In all likelihood you had a sufficient number of TVs on hand to sell to your customers who wanted to buy one, so receiving the new ones four days late imposed no hardship on you. Consequently, the contract breach was immaterial and you cannot sue your supplier

In the second example, however, you ordered the TVs for a special week-end sale you intended to have. You told your supplier about this upcoming sale and the fact that you had already begun advertising it. Now you created a “time is of the essence” contract, the breach of which caused you to lose substantial revenue when the customers who flocked to your store for your weekend sale discovered that you did not have enough TVs to sell them one, even though you had advertised that you impliedly would. Consequently, your supplier’s contract breach was a material one and you can sue him or her for failure to perform.

This is general educational information and not intended to provide legal advice.