Breach – When is a party in breach of contract for failing to deliver?

While there are a number of different types of breach, having a breach requires two basic things. The first is a firm commitment to perform. The second is the failure to meet that commitment. The language that you use in establishing the commitment is the primary factor in determining whether you can claim a breach and whether you would have the right to terminate the agreement and recover damages.

As an example, if you allowed the insertion of the words “time is not of the essence” you don’t have a firm commitment. You would not be able to terminate the agreement for failing to meet a date because you have agreed that timely delivery does not go to the heart of the agreement. Failing to deliver on time would not be a material breach of the agreement that would give you cause to terminate the agreement. If you allowed the insertion of “dates for completion are only estimates, you do not have a firm commitment to meet the delivery date and the net effect would be the same as stating that time is not of the essence.

As an example if you allowed an “efforts” standard to be used in conjunction with a delivery or completion date, such as “best efforts”, “reasonable efforts” or “reasonable commercial efforts” you do not have a firm commitment to deliver by those dates. What you do have is a firm commitment to exercise the stated level of efforts to try to meet those dates. The contractor or supplier would only be in breach if they failed to exercise the specified level of effort. If they provided the specified level of effort and failed to meet the dates they would not be in breach for failing to meet the dates.

To establish a firm commitment for delivery you need to use firm language such as “will” or “shall” in establishing the commitment. That will provide you with a firm commitment where the failure to meet those dates would constitute a breach. Breaches may be either minor or major. A minor breach gives rise to a claim for damages. For example when you insert a liquidated damages provision into an agreement what you are doing is agreeing to accept only money damages for the failure to complete the work on time.

If you want to have the right to terminate the agreement and claim damages you need to establish the failure to deliver on time as a material breach of the agreement. You can do that in your termination for cause section where you specifically state that the failure to deliver on time is a material breach of the agreement. You could also include a statement in the delivery section where you would state that “time of delivery is of the essence of the agreement. That makes it clear that the failing to meet the delivery is a material breach. If you had multiple items being delivered you might also say that “time and rate of delivery are of the essence” so if they are failing to provide all the ordered items on time they would be at breach.

The rights you have under the agreement are always dependent upon the words that you use in establishing the commitment. If you need a firm commitment, use the right words and avoid the insertion of language that changes or waters down the commitment.