What Is A Material Breach Of Contract?

When you enter into a contract – whether it’s with a business partner, a contractor, a supplier, or a client  – you’re relying on the other side to hold up their end of the deal. 

When they don’t, it can cause real financial harm. But not every failure to perform gives you the right to walk away or sue. The law draws an important distinction between a minor breach and a material breach  – and that difference determines what options are available to you.

A breach of contract occurs when one party fails to fulfill an obligation they agreed to under a contract. This could mean:

• Not delivering goods or services at all;
• Delivering something that doesn’t meet the agreed standard;
• Paying late or not paying at all;
• Failing to meet a specific deadline.

But here’s the key point: not all breaches are created equal. A small or technical failure doesn’t necessarily give the innocent party the right to terminate the contract and sue for the full value of their loss. That’s where the concept of materiality comes in.

A material breach is one that goes to the heart of the contract. It’s so significant that it defeats the very purpose of the agreement. It deprives the innocent party of what they were supposed to receive.

The distinction between a material and a minor breach has significant legal consequences.

If the breach is material, the innocent party has two options:

• Terminate the contract — treat the contract as ended and sue for damages resulting from the breach.
• Affirm the contract — keep the contract alive, demand performance, and still claim damages for the loss caused by the breach.

If the breach is minor (non-material), the innocent party may not be able to terminate the contract. They can only sue for the specific damages caused by that limited breach.

This matters enormously in practice. A party who wrongly treats a minor breach as material — and walks away from the contract — can themselves end up being found in breach.

If you’ve suffered a material breach, Ontario law provides several potential remedies:

Damages — The most common remedy. The goal is to put you in the financial position you would have been in had the contract been performed. This can include:

• Lost profits;
• Costs of finding a replacement supplier or contractor;
• Additional expenses incurred because of the breach;
• Loss of a specific business opportunity.

Specific Performance — In rare cases, a court can order the breaching party to actually perform their obligations rather than simply pay damages. This is most common in contracts involving unique property or circumstances where money alone cannot adequately compensate the loss.

Injunctions — A court order preventing the breaching party from taking certain actions — for example, stopping them from selling assets or breaching a non-compete clause.

Repudiation and Anticipatory Breach — If the other party makes clear, before the time for performance arrives, that they have no intention of fulfilling the contract, you may be able to treat this as an immediate breach and act accordingly — without having to wait for the deadline to pass.

Contact us: 416.901.9984 or info@pintoshekib.ca.