Material Breach: The Most Misunderstood Exit Route

The Problem: “Material Breach” Sounds Powerful… Until You Try to Use It

Businesses often assume they can label any serious issue as a “material breach” and terminate the relationship. Unfortunately, the legal threshold is much stricter.

Why This Route Is So Risky

If you get this wrong, the fallout can be severe. An incorrect termination attempt can put you in breach of contract.

That can lead to:

• Damages claims

• Liability for losses incurred

• Payment for the remainder of the contract term

• Reputational harm

In other words, it is not a clause to use lightly.

The Cure Period: The Step Many Businesses Skip

Most contracts require you to give the other party a chance to fix the breach before you can terminate. This usually involves:

1. A formal notice (often with specific wording)

2. Details of the breach

3. A defined period to remedy it

4. A second notice if the breach remains unresolved

Failing to follow these steps exactly can invalidate the termination, even if the breach was material.

How to Strengthen This Clause in Future Contracts

• Define specific breaches that will automatically count as material

• Tie materiality to service levels (“Three failures in a quarter triggers a material breach”)

• Ensure cure periods are workable, not overly strict or too generous

Material Breach Is Useful. But Only When Used Correctly

It offers a strong legal remedy, but only where the facts genuinely justify it. For most businesses, the risk lies not in using the clause, but in assuming they can.

Thinking about terminating for material breach? Get a second pair of expert eyes first.

Before taking any step that might expose your business to risk, we can check the breach, the evidence, and the procedure required. Get in touch for a quick, confidential review before you act.