Dear Forms Committee: I see references in the OREF forms to “material terms” or “material breach.” what does “material” mean in determining whether something is considered “material” or not?
A material term is a provision that relates to significant terms of the agreement, such as price, contingencies, or other provisions that could make an impact on whether or not a buyer or seller would move forward with a transaction. Examples of material terms would be price, closing or possession dates, earnest money amount, and deadlines for performance.
A material breach would be a breach of a contract that is substantial enough to significantly impact the expectation of the other party or create a hardship or ‘injury’ to the other party. Examples of material breaches would be a buyer’s failure to deposit earnest money when due, or a seller’s failure to close on time.
A non-material breach would be a minor breach that doesn’t significantly impact the contract. Examples of non-material breaches would be a seller’s failure to mow the lawn regularly after accepting an offer on their property, or a buyer changing utilities to their name prior to their possession date.
As a reminder, these examples are provided to clarify what is meant when the term “material” is referenced in OREF forms or educational materials.
All comments and responses from OREF or its staff, managers, and volunteers are non-legal opinions made for general purposes. Each Forms subscriber must rely solely upon their Principal broker or personal legal counsel for specific advice and instruction. You and your client should independently confirm that the Form(s) you use are legally suitable for the purposes intended and that they are current with respect to all laws and regulations.