Thursday, August 11, 2011

Prior breach by the other party as excuse for nonperformance under contract

Prior material breach by Plaintiff as a defense to breach-of-contract claim

“It is a fundamental principle of contract law that when one party to a contract commits a material breach of that contract, the other party is discharged or excused from further performance.” Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004). However, when a breach is immaterial, the non-breaching party is not excused from future performance and may sue only for the damages caused by the breach. See Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 693 (Tex. 1994). Whether a party’s breach of contract is so material as to render the contract unenforceable is a question of fact to be determined by the trier of fact based on the evaluation of several factors, including the extent to which the non-breaching party will be deprived of the benefit that it could have reasonably anticipated from full performance. See Hernandez, 796 S.W.2d at 693 n.2; Henry v. Masson, 333 S.W.3d 825, 835 (Tex. App.—Houston [1st Dist.] 2010, no pet.).

SOURCE: Houston Court of Appeals - 01-10-00042-CV - 8/4/11

Ordinarily, the determination of whether there has been a material breach is a question for the jury. See Hernandez, 796 S.W.2d at 693. But when it is clear that the parties intended that time be of the essence, the failure to timely perform can be a material breach as a matter of law. See Mustang Pipeline, 134 S.W.3d at 196. Such an intention is not manifest from the language of this agreement. The contract only requires “prompt” billing, and District 36’s summary-judgment motion did not argue that time was of the essence. Moreover, District 36 has not conclusively demonstrated that it was deprived of the benefit it reasonably expected under the agreement. See Hernandez, 796 S.W.2d at 693 n.2; Herter v. Wolfe, 961 S.W.2d 1, 4 (Tex. App.—Houston [1st Dist.] 1995, writ denied). The record does not reflect that District 16 ever refused to supply District 36 with water during an emergency, and District 36 regularly received water usage reports, which stated the balance of water owed to District 16. District 36 has not established as a matter of law that District 16 failed to bill promptly, nor has it conclusively proved that the failure to bill was a material breach. See Hernandez, 796 S.W.2d at 693 n.2. Accordingly, summary judgment cannot be affirmed on this ground.

SOURCE: Houston Court of Appeals - 01-10-00042-CV - 8/4/11

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