Dissecting Contract Breach Terminology, Warranties, and Remedies: Part One

AuthorBy Jeffrey P. Aiken and Dylan C. Ochoa
6 Volume 42 Issue 3
Published in
The Construction Lawyer
, Volume 42, Number 3. © 2023 American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not
be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Dissecting Contract Breach
Terminology, Warranties, and
Remedies: Part One
By Jerey P. Aiken and Dylan C. Ochoa
Editor’s note: This is part one in
a series of articles. Part two will
be published in the next issue of
The Construction Lawyer.
Construction contracts have
long posed a unique problem
in overall contract jurispru-
dence.1 While this observation is
undoubtedly accurate, it comes
without an explanation as to
what the problem is or why it
has arisen. This article will not
only attempt to articulate an
answer to both issues, but also
to recommend a solution. To
start with, it is not just due to
the fact that, unlike a majority
of other judicially reviewed transactions, construction, by
its nature, is process-oriented. Nor is it primarily due to
the interdependent nature of construction contract per-
formances, where a party may simply be precluded from
performing without prefatory performance by the other,
such as by providing information essential to the latter’s
performance. Rather, construction contracts should be
viewed as a prism for correcting the skewed vision of
contractual breach as a binary choice due to less than
accurately descriptive terminology. Nearly all judicial
pronouncements on the subject of contractual breach are,
as will be shown, inappropriately narrow in focus, lead-
ing to oversimplication and misleading conclusions. A
more critical and holistic approach is necessary to pro-
vide a sound jurisprudential basis for decision-making.
The heart of the problem is the concept of “material”
breach, which has been shoehorned into the construction
law eld.2 Court decisions and articles dealing with con-
struction-related contracts are replete with inconsistent
treatment of basic contract terminology when applied to
potential damage and termination claims in situations
that simply do not t an either/or approach—namely,
it either is, or is not, material. The same can be said for
claims of breach of contract in the eld of information
technology migration contracts, which have a similar
process-oriented focus with essential interdependencies
among the involved parties. The absence of published
analysis regarding the nature of differences between var-
ious types of breach and their impact on the scope of
available claims seems overdue.3
The very concept of “breach” has at times been applied
to excuse a nonbreaching party’s future performance on
a blanket basis without describing the signicance of the
While the need to draw clear-cut lines between
categories of contractual breach may seem unnecessary,
it actually is essential. The void has persisted in no small
part because of the siloed treatment of construction con-
tract jurisprudence from relatively simple performance
and sale transactions, which themselves do not easily t
into the unique nature of construction and other process-
oriented contracts requiring interdependent performances.
Possible inconsistencies and difculties can also be
seen when considering the application of claim limita-
tion periods. If the law regarding contractual breach had
not been developed in a virtual vacuum, with apparent
disregard of the complexities of process-focused agree-
ments, there likely would not be the glaring inconsistency
in approach that has ultimately developed.
The Material-Immaterial Breach Def‌iciencies
The “First to Breach” Rule
The existing nomenclature evidenced in most judicial deci-
sions, and employed by many commentators, focuses on
whether a breach provides the nonbreaching party an
option to (1) pursue a damage remedy and/or (2) declare
the contract terminated, thereby releasing it from all fur-
ther obligations.
The predominant term used to describe
this type of qualifying breach is a “material” one.6
Another characterization is that the breach goes to the
essence of the contract.
While both are vague, some guid-
ance is offered via the Restatements in terms of general
criteria for establishing a breach sufcient to justify the
nonbreaching party’s future nonperfor mance as follows:
(a) the extent to which the injured party will be
deprived of the benet to which he reasonably expected;
(b) the extent to which the injured party can be ade-
quately compensated for the part of that benet to which
he will be deprived;
(c) the extent to which the party failing to perform or
to offer to perform will suffer forfeiture;
Jerey P. Aiken
Dylan C. Oc hoa
6 6 7/18/2023 1:52:06 PM7/18/2023 1:52:06 PM

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