A substantial failure in performance that allows contract termination is known as?

A substantial failure in performance that allows for contract termination is referred to as a material breach. This term is significant in contract law because it denotes an infringement that is so serious that it undermines the entire contractual agreement. When a material breach occurs, it entitles the non-breaching party to terminate the contract and seek damages.

In this context, a material breach goes beyond slight or minor infractions; it represents a failure to complete a significant aspect of the contract that results in a substantial detriment to the affected party. This breach effectively nullifies the fundamental purpose of the contract, prompting the aggrieved party to seek legal remedies, which may include termination of the contract and recovery of losses incurred due to the breach.

Understanding the difference between types of breaches is crucial for managing supplier relationships. Minor or technical breaches may allow the contract to remain enforceable with remedies such as repair or compensation, but a material breach fundamentally alters the agreement's enforceability and activates the right to terminate the contract.