I. Is There a Doctrine of “Material” Breach?

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 646-650

Page 646

There are many similarities between the American law of contracts and Anglo-Canadian contract law. There are also important differences between the two systems, of course, as the rules relating to third-party beneficiaries,⁷⁵estoppel as a sword⁷⁶and good faith⁷⁷illustrate. With respect to the present topic - the consequences of repudiatory breach - there are both terminological and substantive differences between American doctrine and Canadian common law. From a terminological perspective, although American usage also is somewhat variable, the term "material breach" is commonly used to refer to what an English or Canadian lawyer would describe as "repudiatory breach." From a substantive perspective, American law has recognized that the perpetrator of a material breach of contract ought normally to be given a reasonable opportunity to cure the defective performance. When a defective performance has been cured, the right of the party not at fault to terminate the contract for material breach is defeated and the contract remains in full force and effect. The recognition of the right to cure appears to have been first accomplished in the context of sale of goods transactions as an improvement upon the "perfect tender rule." The latter rule still forms a part of Anglo-Canadian sale of goods law. The right to cure has been recognized as a more general proposition, however, and is restated in the pertinent articles of the American Law Institute’s Restatement of Contracts 2d.⁷⁸

Page 647

Anglo-Canadian law, on the other hand, does not recognize a right to cure in the context of repudiatory breach,⁷⁹nor has the practice yet developed of referring to repudiatory breach as "material breach" in the American manner. Nonetheless, the terms "material" and "materiality" may arise in the context of discussions of repudiatory breach for a number of reasons. First, parties may use the concept of material breach in the language of their agreements and provide, for example, that certain remedies are available in the event of material breach. While a carefully drawn agreement would define that term, it is not invariably the case, of course, that this occurs. Second, as we have seen, the test for operative misrepresentation inducing a contract requires that the representation be "material" and, accordingly, it is not uncommon in contractual drafting to stipulate that a breach of the term of the agreement setting out "representations and warranties" occurs only where the contractual misstatement is false "in a material respect." Accordingly, it may be useful to consider whether the term "material breach" has acquired a technical or commonly understood meaning in the Anglo-Canadian law of repudiatory breach.

As a matter of ordinary usage, the adjective "material" has a number of possible interpretations. As we have seen, American usage in the...