Contract, Breach of Contract, and Material Breach of Contract by: Wendy Rosenstein

At its most basic level, a contract is an agreement to make a trade. Parties to a contract agree to perform a specific action on the condition that the other side also performs a specific action. For instance, you and a Girl Scout could create a contract in which the Girl Scout agrees to deliver one box of cookies and you agree to pay her $6.00. In this case, both you and the Girl Scout have obligations under the contract.

If the Girl Scout failed to send you the cookies, what do you do? You send her a note, in writing, telling her that you expect the cookies (or assurance that you will get the cookies) within a certain amount of time—this is notice and the opportunity to cure. Most contracts have a “notice and opportunity to cure” provision, which essentially says that one side must give the other side an opportunity to fix breaches before canceling the contract. Once a party receives a notice to cure, they must either rectify the problem or offer adequate assurances that they will fix the problem. Generally, the party has only a short period of time to address the breach.

Some breaches are so large that the parties cannot continue with the contract. These are termed “material breaches.” One way to commit a material breach is to fail to cure a potentially material breach after receiving notice.[1] For instance, if the Girl Scout didn’t send you the cookies within a reasonable amount of time after you sent the letter, you could terminate the contract and sue the Girl Scout for material breach of contract.

Notice and Opportunity to Cure Provisions:

Notice and opportunity to cure provisions are standard in most construction contracts. They require the nonbreaching party to give the breaching party an opportunity to cure the breach before terminating the contract. For example, the US Navy hired a contractor to build a training center in Miami, but the contractor worked so slowly that the Navy became concerned that the contractor would not be able to timely complete the project. The Navy sent several Cure Notices to the contractor—it told the contractor to speed up the pace of the work or risk termination of the contract. The contractor did not speed up the pace of the work, and because the contractor failed to provide adequate assurance that it could complete the project or even make progress toward completion, the Navy terminated the contract.[2]

The policy behind cure notices is robust and multi-faceted. Some values advanced by cure notices are: (1) to prevent forfeiture by termination, (2) to allow the breaching party to mitigate damages, (3) to avoid similar future deficiencies in performance, and (4) to promote the informal settlement of disputes.[3]

Furthermore, the failure to provide a cure notice prior to enacting a contractual remedy, may, itself be a material breach of the contract. If a party simply terminates the contract when they should have issued a cure notice, then the party has committed a material breach of contract.

Implied Notice and Opportunity to Cure:

If a contract does not contain explicit language regarding notice and opportunity to cure, courts will assume that a contract has an “implied” notice and opportunity to cure provision. This means that a court will essentially pretend that the contract contains a notice and opportunity to cure provision. Notice and cure provisions are generally implied in construction contracts as a matter of law, although Washington courts have yet to rule on this issue.

In the influential case McClain v. Kimbrough Const. Co., Inc., a Tennessee court held that notice and opportunity to cure is implied in every contract. The case concerns a one-page, DIY contract between a brick mason and a general contractor, which did not contain a notice to cure provision (among other problems). Subsequently, the general contractor terminated the brick mason’s contract due to sub-par work—without notice to cure. The brick mason sued, and the court held that because of the implied notice to cure, the brick mason was entitled to lost profits. The court did not specify the number of days of notice that the brick mason should have received: only that the brick mason was entitled to “reasonable” notice.[4]

US Federal courts have reached similar rulings. In the case of Cortolano & Barone, Inc v. Morano Const. Corp., the subcontractor’s supervisor sent the general contractor a letter stating: “Your request is pure lunacy… I am not being paid to be your teacher on how to interpret mechanical drawings…” This attitude, coupled with the subcontractor’s slow progress, led to the general contractor terminating the subcontract without notice. The federal court held that despite the subcontractor’s poor attitude, and the fact that the contract contained no language regarding notice and opportunity to cure, the subcontractor was entitled to notice and opportunity to cure, and was therefore entitled to damages.[5]

Washington courts have yet to rule on whether there is an implied notice to cure provision in construction contracts. In other, non-construction contracts (i.e., Real Estate Purchase and Sale Agreements), a Washington court ruled that the non-breaching party was under no obligation to give the breaching party an opportunity to cure.[6] However, in the case of construction contracts, it is possible that Washington courts would follow Tennessee and the federal government, as an implied right to cure is well-established common law.[7]

[1] lack of timely cure of a curable breach also is relevant to materiality because it may enhance insecurity over future performance. § 18:15. Principle of cure and its implications upon materiality, 5 Bruner & O’Connor Construction Law § 18:15

[2] Danzig v. AEC Corp., 224 F.3d 1333 (Fed. Cir. 2000).

[3] § 18:15. Principle of cure and its implications upon materiality, 5 Bruner & O’Connor Construction Law § 18:15

[4] McClain v. Kimbrough Const. Co., Inc., 806 S.W.2d 194 (Tenn. Ct. App. 1990).

[5] U.S. for Use & Benefit of Cortolano & Barone, Inc. v. Morano Const. Corp., 724 F. Supp. 88 (S.D.N.Y. 1989).

[6] Ragnar Enterprises v. Tapley, 110 Wn. App. 1033 (2002).

[7] See § 18:41. Contract termination for cause—Adequacy of evaluation of materiality of breach—Adequacy of cure notice, 5 Bruner & O’Connor Construction Law § 18:41 (“Cure is a fundamental common-law right implied in every contract as a matter of law.”).

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