Material breach in construction contracts

The following Construction practice note provides comprehensive and up to date legal information covering:

  • Material breach in construction contracts
  • Relevance of material breach on construction projects
  • Standard forms
  • Distinction from repudiatory breach
  • Contractual definition
  • Meaning of material breach
  • Dalkia v Celtech
  • Vivergo v Redhall
  • Compass (t/a Medirest) v Mid Essex Hospital Services NHS Trust
  • PBS Energo v Bester Generacion

Material breach in construction contracts

This Practice Note considers the relevance of material breach in the context of construction projects, looks at contractual definitions of material breach and identifies key case law on the meaning of the term in the absence of a contractual definition.

Relevance of material breach on construction projects

The term ‘material breach’ is found in various types of contract. In the context of construction contracts, material breach provisions are most likely to be found in relation to termination and/or suspension—ie the contract may provide that:

  1. the contractor and/or employer is able to terminate, and/or

  2. the contractor is able to suspend work

if the other party is in ‘material breach’. In relation to the ability to terminate, there is often a grace period during which the party in material breach is afforded the opportunity to remedy the breach before the contract is in fact terminated.

It is also common to see material breach provisions in PFI/PF2 contracts (see Practice Note: Termination of PFI/PF2 contracts).

In addition, material breach may potentially be relevant to the question of whether works are practically complete. For example, in Mears v Costplan, the court considered whether a breach of an agreement for lease in relation to the size of the rooms as constructed was deemed to be a material breach. The court observed that, if the breach had been deemed a material

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