Recently, I had the opportunity to present to the Commercial Litigation Committee of the Chicago Bar Association on a topic that frequently arises in commercial disputes but is often misunderstood in practice: the distinction between material and partial breaches of contract. Titled “Materiality Matters: Material vs. Partial Breaches of Contract,” the presentation explored how courts distinguish between different types of contractual breaches and why that distinction is critical in commercial disputes and, more specifically, in insurance coverage disputes.
You might reasonably ask what makes a breach “material” and why “materiality” of the breach matters. But the distinction between “material breaches,” “breaches,” and “partial breaches” may be outcome-determinative because whether a breach is considered material or partial often determines the remedies available to the non-breaching party. A material breach may excuse further performance and permit termination of the agreement, while a partial breach typically allows the contract to continue, limiting relief to damages. Because materiality is inherently a fact-intensive inquiry, the presentation focused on case law and practical examples illustrating how courts evaluate materiality in real-world disputes.
Using a series of case studies, I explored various scenarios, including mutual breaches, where one party continues performance despite a material breach, and how post-breach conduct can affect later claims and defenses. While this is often seen in general contract disputes, the discussion incorporated an insurance coverage case to demonstrate how traditional breach analysis can influence coverage obligations and strategic decision-making—an issue that my colleagues and I regularly address for GLG’s clients.
The program concluded with practical takeaways for practitioners and clients: carefully document performance, address potential breaches promptly, and thoughtfully consider the consequences of continuing performance after a breach occurs. In many cases, decisions made in the immediate aftermath of a breach can significantly shape the outcome of a dispute. The distinction between “material” and “partial” breaches is important in litigation as it may impact the availability and nature of potential counterclaims. It is also an important distinction that should factor into the drafting of commercial contracts.