Actions, not words: material breach of contract

What constitutes ‘material’ breach of contract? The court has clarified that a party in breach must take positive action to remedy the breach – simply expressing an intention to perform contractual obligations is not enough.  The award-winning lawyers at Bahamas law firm ParrisWhittaker are specialists in contractual disputes involving commercial organisations.

A ruling from the Court of Appeal in the UK has persuasive authority on the courts in The Bahamas and confirms that actions, not merely words, are needed to remedy a material breach of contract.

What amounts to ‘material breach’?

A material breach of contract is a significant breach that leads to substantial and serious consequences for the other party. The appropriate remedy depends on the contractual terms: in some cases, the contract may provide for termination in the event of a material breach, while other contracts may be silent.

In the absence of a specific remedy within the contract, the party not in breach may have the right to claim damages for consequential losses and to terminate the contract.

But what’s the position of the parties where the party in breach commits to remedying the breach by performing its obligations – but takes no action in practice?

What’s the background?

In this case, the claimant contracted to provide professional services in relation to various equity finance strategies under the terms of a consultancy agreement. The agreement provided for termination in the event of a material breach, “and not having remedied such breach within 21 days after the service of written notice by the first Party requiring the same to be remedied”.

A material breach was alleged against the claimant and the High Court agreed – the claimant had refused to work. On appeal, he did not argue that he had not been in material breach; his contention was that the finding that the breach had not been remedied was wrong.

He argued that he had expressed an intention to fulfil his obligations, therefore any breach should be considered remedied. In reality, the claimant had provided no further services under the contract – even beyond the 21-day period. At issue on appeal was whether the claimant had remedied a material breach within that contractual 21-day period.

The Court of Appeal agreed that the specific breach was the claimant’s refusal to provide services. The appropriate remedy for this breach was for the claimant to actually provide the required services. He failed to do this.

The appeal judges made clear that his solicitors’ letter stating that he confirmed the intention to perform his contract obligations did not remedy the breach – actual performance was necessary.

What does this mean?

Material breach has significant implications for the non-breaching party and it is right that positive remedial action should be taken if there is any intention to remedy the contract. Saying you will do something, but doing nothing in practice, does not remedy the breach.

Should you be involved in a contractual dispute involving an alleged breach of contract, we can guide you through your options to ensure your interests are protected. We advise you not to take any further steps without taking specialist advice from experienced commercial disputes lawyers.

Contact the expert commercial lawyers at ParrisWhittaker for robust advice and representation as early as possible.

¹ Bains v Arunvill Capital Ltd [2020] EWCA Civ 545