Can You Get Out of a Contract if the Other Side Breaches That Contract?

If you have a business contract, and the other side breaches the contract, the initial thought may be that you are excused from performance. After all, they breached the agreement, and why should you have to continue to perform an agreement where the other side is not doing what it’s supposed to do?

But the question of whether and when you, as a non-breaching party, can legally stop performing under an agreement just because the other side isn’t fulfilling its obligations, isn’t so easy to answer.

Material Breach?

An initial question that a court will ask is whether the other side has materially breached the agreement. A minor, trivial, or nonmaterial breach, won’t allow you to just walk away from your obligations under the agreement, and unilaterally declare it null and void.

Courts will ask whether the breach goes to the heart and essence of the agreement—the core reason why the parties entered into the agreement in the first place.

Alternatively, the breach may be technical, immaterial, or easily remedied, in which case you do, in fact, have to continue to perform your obligations under the contract.

Clarity in the Contract

Your initial question may be “how do I know if the other side’s breach is, in fact, material or not?” That’s a good question and one that may not always be very clear initially. That’s why it’s best to either get legal counsel, or to try to reach out to the other side, before just declaring  the contract null and void (and thus, stop performance) on your own.

When you’re first drafting your contract or negotiating it, you can specify what provisions are considered material, and which aren’t, which may give you some clarity down the line if there is a breach. But if you haven’t done that in advance you may be left to speculate whether a court will agree with you, that you can walk away from the contract because of the other side’s breach.

Be Careful of Waivers

So, let’s assume that there is what appears to be a material breach. If you do continue to perform your end of the bargain, even in the face of the material reach, it could be seen as a waiver of the breach.

And that makes matters more confusing. Because now, you could prejudice yourself by refusing to perform if the other side’s breach is not material, but if it is, and you continue to hold up your end of the bargain, you could be prejudicing your own rights to sue, or seek whatever remedy you could otherwise get.

That’s why continued performance in the face of a material breach by the other side, should be accompanied by some reservation of rights, or some agreement or at least, a writing that clarifies that your continued performance isn’t a waiver.

Need help with your business contract or agreement? Call our Fort Lauderdale business litigation lawyers at Sweeney Law P.A. at 954-440-3993 for help today.

Sources:

courtlistener.com/opinion/1779208/acosta-v-district-bd-of-trustees/

casetext.com/case/marshall-const-v-coastal-sheet-metal