Performance, breach, and discharge - Breach (including material and partial breach, and anticipatory repudiation)

Learning Outcomes

After reading this article, you will be able to distinguish between material and partial breach, identify anticipatory repudiation, and determine the legal consequences of each type of breach. You will know when a party’s nonperformance excuses the other party’s obligations, and how to apply these principles to MBE-style questions.

MBE Syllabus

For MBE, you are required to understand the rules governing breach of contract, including the types of breach and their effects on contractual duties and remedies. In your revision, focus on:

  • Recognizing the difference between material and partial breach.
  • Understanding anticipatory repudiation and its consequences.
  • Knowing when a breach excuses performance by the nonbreaching party.
  • Applying the substantial performance doctrine.
  • Identifying the rights and remedies available after breach.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

  1. Which of the following best describes a material breach?
    1. A minor deviation from the contract terms.
    2. A breach that substantially deprives the nonbreaching party of the benefit of the bargain.
    3. Any failure to perform on time.
    4. A breach that is promptly cured.
  2. If a party unequivocally states before performance is due that they will not perform, this is:
    1. A partial breach.
    2. Anticipatory repudiation.
    3. Substantial performance.
    4. Accord and satisfaction.
  3. After a material breach by one party, the nonbreaching party may:
    1. Only sue for damages but must continue performance.
    2. Suspend their own performance and sue for total breach.
    3. Ignore the breach and continue as if nothing happened.
    4. Demand specific performance only.
  4. Which statement about anticipatory repudiation is correct?
    1. The nonbreaching party must always wait until performance is due to sue.
    2. The repudiating party can never retract their repudiation.
    3. The nonbreaching party may treat the contract as immediately breached.
    4. Anticipatory repudiation applies only to contracts for the sale of goods.

Introduction

A contract is breached when a party fails to perform as promised. Not all breaches are equal: some are so serious that they excuse the other party’s performance, while others are minor and only give rise to damages. The MBE tests your ability to distinguish between material and partial breach, understand anticipatory repudiation, and know the consequences for each.

Types of Breach: Material vs. Partial

A material breach is a failure to perform that goes to the heart of the contract, depriving the nonbreaching party of the substantial benefit expected. This type of breach excuses the nonbreaching party from further performance and allows them to sue for total breach.

Key Term: Material Breach
A breach that substantially defeats the purpose of the contract, excusing the nonbreaching party from further performance and allowing them to treat the contract as terminated.

Key Term: Partial Breach
A minor failure to perform that does not destroy the contract’s value for the nonbreaching party. The contract continues, but the nonbreaching party may recover damages.

A partial breach (sometimes called an immaterial breach) is a minor deviation from the contract terms. The nonbreaching party must still perform but may claim damages for the deficiency.

Determining Materiality

Courts consider several factors to decide if a breach is material:

  • The extent to which the nonbreaching party is deprived of the benefit expected.
  • Whether the nonbreaching party can be adequately compensated.
  • The extent of performance already rendered.
  • The likelihood the breaching party will cure the breach.
  • Whether the breach was willful or in bad faith.

If the breach is material, the nonbreaching party may suspend performance and sue for total breach. If the breach is partial, the contract remains in force.

Substantial Performance Doctrine

Under common law, if a party has substantially performed, minor defects do not excuse the other party’s performance, but damages may be awarded for the deficiency.

Key Term: Substantial Performance
Performance that, despite minor deviations, fulfills the essential purpose of the contract, requiring the other party to perform but allowing damages for any shortfall.

Anticipatory Repudiation

Anticipatory repudiation occurs when, before performance is due, a party clearly and unequivocally indicates they will not perform. This allows the nonbreaching party to treat the contract as immediately breached and sue for damages, or to wait for performance to become due.

Key Term: Anticipatory Repudiation
An unequivocal statement or act by a party before performance is due, indicating that they will not perform their contractual obligations.

Retraction of Repudiation

A repudiating party may retract their repudiation unless the nonbreaching party has already relied on it, changed position, or indicated that they consider the repudiation final.

Rights and Remedies After Breach

  • Material breach: Nonbreaching party may suspend performance, treat the contract as ended, and sue for total breach.
  • Partial breach: Nonbreaching party must continue performance but may claim damages.
  • Anticipatory repudiation: Nonbreaching party may sue immediately or wait until performance is due.

Worked Example 1.1

A builder contracts to construct a house for a homeowner, with payment due upon completion. The builder completes 95% of the work, but omits a closet and uses a different brand of paint than specified. The homeowner refuses to pay, claiming material breach. Is the builder’s breach material?

Answer: No. The builder has substantially performed. The omissions are minor and do not defeat the contract’s main purpose. The homeowner must pay, but may deduct damages for the deficiencies.

Worked Example 1.2

A supplier agrees to deliver 1,000 widgets to a retailer by June 1. On May 15, the supplier emails, “I will not deliver the widgets as promised.” What are the retailer’s options?

Answer: The supplier’s statement is anticipatory repudiation. The retailer may treat the contract as immediately breached and sue for damages, or wait until June 1 to see if the supplier performs.

Worked Example 1.3

A painter is hired to paint a house by July 1. The painter finishes on July 2. Is this a material breach?

Answer: No. A one-day delay is a partial breach unless time was expressly made “of the essence.” The homeowner must pay but may claim damages for any loss caused by the delay.

Exam Warning

On the MBE, if a party has fully performed and is only waiting for payment, anticipatory repudiation does not allow immediate suit. The nonbreaching party must wait until payment is due.

Revision Tip

If the facts do not specify whether a breach is material or partial, look for whether the nonbreaching party received the essential benefit of the bargain.

Key Point Checklist

This article has covered the following key knowledge points:

  • Material breach excuses the nonbreaching party’s performance and allows them to treat the contract as ended.
  • Partial breach does not excuse performance; the contract continues, but damages may be claimed.
  • Substantial performance means minor defects do not excuse the other party’s performance.
  • Anticipatory repudiation allows the nonbreaching party to sue immediately or wait, unless they have fully performed and are only awaiting payment.
  • Retraction of repudiation is possible unless the nonbreaching party has relied or indicated the repudiation is final.

Key Terms and Concepts

  • Material Breach
  • Partial Breach
  • Substantial Performance
  • Anticipatory Repudiation
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