Florida’s “prior breach” doctrine, sometimes referred to as the “first breach” doctrine, is a fundamental principle of contract law. Under the prior breach doctrine, when one party to a contract breaches its obligations, the other party to the contract is discharged from having to perform its obligations. See Focus Mgmt. Group USA, Inc. v. King, 171 F. Supp. 3d 1291, 1299 (11th Cir. 2016) (“[T]he general rule is that a material breach of the agreement allows the non-breaching party to treat the breach as a discharge of his contractual liability.”); Hamilton v. Suntrust Mortg. Inc., 6 F. Supp. 3d 1300, 1309 (S.D. Fla. 2014) (“It is a fundamental principle of Florida contract law that a material breach by one party excuses the performance by the other.”).
In other words, if one party has not honored his or her commitments in a contract, the other party does not have to perform his or her part of the contract, and cannot be later faulted for not performing under that circumstance. See Toyota Tsusho Am., Inc. v. Crittenden, 732 So. 2d 472, 477 (Fla. 5th DCA 1999) (“When a nonbreaching party to a contract is confronted with a breach by the other party, the nonbreaching party may stop performance, treating the breach as a discharge of its contractual liability.”); City of Miami Beach v. Carner, 579 So. 2d 248, 251 (Fla. 3d DCA 1991) (“The rule is quite clear that a contracting party, faced with a material breach by the other party, may treat the contract as totally breached and stop performance.”).
The doctrine could come into play in several contract legal, including issues involving:
Depending on the circumstances, the prior breach doctrine can be raised either as a defense to a breach of contract action, or as the basis for a claim, against the breaching party. However, in order for it to apply in any context, four elements must be present:
The first element should be obvious. The prior breach doctrine only applies if the other party breached the contract first, or prior to, any alleged breach by the party seeking to utilize the doctrine. See e.g., No. Trust Invs., N.A. v. Domino, 896 So. 2d 880, 882 (Fla. 4th DCA 2005) (“[A] material breach of the agreement allows the non-breaching party to treat the breach as a discharge of his contract liability.”).
The second element, which requires that the breach be material, bears on the nature and impact of the breach. “To establish a material breach, the party alleged to have breached the contract must have failed to perform a duty that goes to the essence of the contract and is of such significance that it relieves the injured party from further performance of its contractual duties.” Burlington & Rockenbach, P.A. v. Law Offices of E. Clay Parker, 160 So. 3d 955, 960 (Fla. 5th DCA 2015) (emphasis added).
The materiality requirement mandates that the breached contractual duty must be of significant importance. Materiality is a question of fact, meaning the issue is decided by e jury (or the judge in a bench trial). Hamilton, 6 F. Supp. 3d at 1309 (“Whether a particular breach is material raises an issue of fact.”).
Materiality is determined based on all relevant circumstances, including the intent and conduct of the parties, and the extent of the injury sustained as a result of the breach. See e.g., Indemnity Ins. Corp. of DC v. Caylao, 130 So. 3d 783, 787 (Fla. 1st DCA 2014) (“Whether a breach is material and important is a question of degree, which must be answered by weighing the consequences of the breach in light of the actual custom of persons in the performance of contracts similar to the one involved in the particular case. “).
“A material breach occurs only when an injured party has sustained a substantial injury due to the breach.” Bland v. Freightliner, LLC, 206 F. Supp. 2d 1202, 1210 (M.D. Fla. 2002) (emphasis added). “To determine whether the breach is material, there are certain criteria one may consult when undertaking such a task [including]…: (1) the extent to which the injured party will be deprived of the benefit which can reasonably be expected; (2) the extent to which the injured party can be adequately compensated for the part of the benefit of which she will be deprived; (3) the extent to which the breaching party will suffer forfeiture; (4) the likelihood that the breaching party will cure; and (5) the extent to which the behavior of the breaching party comports with the standards of good faith and fair dealing.” Id.
The breach of ministerial, minor, technical, or administrative provisions of a contract will typically not be found to be material. See Beefy Trail, Inc. v. Beefy King Int’l, Inc., 267 So. 2d 853, 857 (Fla. 1972) (“A defendant’s failure to perform some minor part of his contractual duty cannot be classified as a material or vital breach.”). For example, in Covelli Family, L.P. v. ABG5, LLC, 977 So. 2d 749, 752 (Fla. 4th DCA 2008), the Court found that a commercial lessor’s failure to obtain an estimate by a contractor or architect, as required by the lease, prior to sending notice of its intent to terminate lease was a technical, rather than a material, breach of a commercial lease agreement.
Likewise, materiality will not be found where little to no harm or injury is suffered due to the alleged breach. See, e.g., MDS (Canada), Inc. v. Rad Source Techns., Inc., 720 F.3d 833, 850 (11th Cir. 2013) (not a material breach of a requirement to maintain patents where the patent was for obsolete or noncompetitive product, the licensee deemed the loss of the patent so unimportant that it never requested the patent be retroactively maintained, and the licensee suffered no harm from the breach).
Failure to comply with the contract’s price or payment obligations is almost always found to be a material breach. See, e.g., Focus Mgmt. Group USA, Inc., 171 F. Supp. 3d at 1297 (“Price or compensation is typically an essential term of a contract….”). For example, four (4) widgets at $8.00 each would be a material breach of a contract for four (4) widgets at $4.00 each.
The failure to meet contractual deadlines may or may not be deemed material. A slight delay in meeting deadlines is typically not considered to be a material breach. See e.g., Edwards Waters College, Inc. v. Johnson, 707 So. 2d 801, 802 (Fla. 1st DCA 1998) (tender of payment one day late was not a material breach of settlement agreement).
Failure to meet a deadline is more likely to qualify as a material breach where the contract specifically provides that time is essential or “time is of the essence.” See e.g., Legacy Place Apartment Homes, LLC v. PGA Gateway, L.T.D., 65 So. 3d 644 (Fla. 4th DCA 2011) (“Because time was ‘of the essence’ in the post-closing agreement, appellee’s failure to complete construction of RCA Boulevard by the deadline in the contract constituted a material breach.”).
“As a general rule, time is considered to be of the essence where an agreement specifies, or where such may be determined from the nature of the subject matter of the contract, or where treating time as nonessential would produce a hardship, or where notice has been given to the defaulting party requiring that the contract be performed within a stated time, which must be a reasonable time according to the circumstances.” Sublime, Inc. v. Boardman’s Inc., 849 So. 2d 470, 471 (Fla. 4th DCA 2003).
Even where time is declared to be “of the essence,” delay will not be deemed a material breach unless the clause is clearly applicable to the specific contract requirement at issue. See e.g., Royal Dev. & Mgmt. Corp. v. Guardian 50/50 Fund V, Ltd., 583 So. 2d 403, 405 (Fla. 3d DCA 1991) (“The ‘time is of the essence’ provision in this contract is not shown to be clearly applicable to the clearing of construction debris. The trial court correctly considered that provision unimportant in this context.”); Jackson v. Holmes, 307 So. 2d 470, 472 (Fla. 2d DCA 1975) (“A ‘time is of the essence’ provision will be given effect provided it is shown to be clearly applicable to the contract requirement against which it is sought to be applied.”).
The third element requires that the breached contractual provision be a “dependent” covenant. Whether a covenant is “dependent” or “independent” is based on the nature of the contract provision itself and the parties’ intent in forming their agreement.
“Conditions or covenants in a contract are classed as dependent or independent from a consideration of the intention and understanding of the parties as shown by the whole contract.” Steak House, Inc. v. Barnett, 65 So. 2d 736, 737 (Fla. 1953). “A covenant is independent where it does not go to the whole consideration of the contract but is only subordinate and incidental to its main purpose ….” Id. at 737-38 (emphasis added).
“A covenant is dependent where it goes to the whole consideration of the contract; where it is such an essential part of the bargain that the failure of it must be considered as destroying the entire contract; or where it is such an indispensable part of what both parties intended that the contract would not have been made with the covenant omitted.” Steak House, Inc., 65 So. 2d at 738 (emphasis added). “A breach of such a covenant amounts to a breach of the entire contract ….” Id.
The description of a dependent/independent covenant does sound similar to the definition of materiality and some cases treat these requirements interchangeably. However, the greater weight of authority treats these concepts as distinct elements of the analysis. See Taylor v. Genesee & Wyoming, Inc., 2015 WL 12683821 *5 (M.D. Fla. Sept. 25, 2015).
While materiality is a fact-based analysis focused on the substantiality of the breach, the injury suffered and closely related factors, whether a covenant is dependent is a question of law for the court to decide based on the intent of the parties gleaned from the face of the contract. See e.g., Richland Towers, Inc. v. Denton, LLC, 139 So. 3d 318, 321 (Fla. 2d DCA 2014) (“Whether the payment obligations under the employment agreements were dependent or independent covenants is an issue of law that turns on the proper interpretation of the contracts.”).
A prior breach defense or claim may be waived by the parties. The fourth element of the prior breach analysis examines whether the party seeking to avail itself of the doctrine waived the ability to do so. A prior breach can be expressly waived according to the terms of the contract. See, e.g., Branch Banking & Trust Co. v. S&S Development, Inc., 2015 WL 12683834 *8 (M.D. Fla. June 30, 2015) (finding a prior breach defense was contractually waived).
A prior breach can also be implicitly waived by the parties conduct. In these instances, the conduct of the parties following a prior breach will determine whether a prior breach claim or defense can be sustained. For example, a prior breach may be waived where the party continued to retain or enjoy benefits under the contract after learning about prior breach the breach. See e.g., AVVA-BC, LLC v. Amiel, 25 So. 3d 7 (Fla. 3d DCA 2009) (reversing rescission of lease premised upon an alleged prior breach of dependent covenant based on waiver by acceptance of benefits under the lease).
A prior breach may also be waived where the party did not complain of the prior breach at the time it happened and instead continued to perform under the contract. See Acosta v. Dist. Bd. of Trustees of Miami-Dade Comm. College, 905 So. 2d 226, 228–29 (Fla. 3d DCA 2005) (“Where a party fails to declare a breach of contract, and continues to perform under the contract after learning of the breach, it may be deemed to have acquiesced in an alteration of the terms of the contract, thereby barring its enforcement.”); Hamilton, 6 F. Supp. 3d at 1309 (quotation omitted) (emphasis added) (“There are few principles of contract law better established, or more uniformly acknowledged, than the rule that when a contract not fully performed on either side is continued in spite of a known excuse, the right to rely upon the known excuse is waived….”).
Author Gulisano Posted on Categories Civil Litigation, ContractsAddress
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