Key Takeaways

  • Material law generally refers to legal provisions or facts significant enough to affect the outcome of a dispute or a party’s legal obligations.
  • Courts consider evidence, issues, or breaches “material” if they are central to the case or contract.
  • A material fact is one that influences decisions, such as entering into a contract or proving liability.
  • Material issues are questions that must be resolved in litigation for the case to move forward.
  • Material witnesses provide testimony vital to establishing facts in dispute.
  • A material breach of contract allows the non-breaching party to seek remedies, as opposed to a minor breach.
  • In business law, “material” can range in meaning from something non-trivial to a deal-breaker, particularly in mergers and acquisitions.
  • Under definitions in contracts, material law may specifically mean an enforceable legal provision whose violation causes a material adverse effect.
  • Courts evaluate “materiality” contextually, often considering whether a reasonable person would find the fact or violation important to the decision at hand

The material law definition explains that material law is a type of representation made to an individual with the goal of getting that person to enter into and agree to a contract that the person would not have normally done without that representation.

About Material Law

When an allegation is made, it is said to be material when it forms a substantive part of the presented case. Material indicates it has to do with the matter. It has influence or is effective, is going to have merit, and is more or less necessary. The evidence offered in a cause or a question is considered material when relevant and goes to the heart of the matter in a dispute or either has a legitimate influence on the decision rendered in the case.

Material Fact

A material fact can be one of three things:

  • An occurrence.
  • An event.
  • Information.

Each must be significantly sufficient to influence someone to act in a certain way. This would include entering into a contract. When formal court proceedings are underway, material facts can be anything necessary for proving one party's case or establishing a point crucial to an individual's position.

Material Issue

A material issue is a question that must be answered when two parties are in dispute and involved in litigation. For the dispute to be resolved, there must be a response to the question.

Material Witness

During a lawsuit, a material witness is someone whose testimony is a vital part of the proceedings. Material witnesses can and will be compelled to appear and provide testimony in court. If there is any indication that the individual's safety is in jeopardy and they may be in danger due to actual testimony or planned testimony, legal protection or protective custody will be provided.

Material Breach

When there is a valid reason for one party not to perform their part of a contract, that is considered a material breach of the agreement. If one party deviates slightly or insignificantly from the terms of the contract, that is not considered a material breach.

Material Law in Contractual Contexts

In contract law, material law is closely tied to provisions and representations that form the foundation of an agreement. Many contracts explicitly define a “material law” as any enforceable legal requirement where a violation would have a material adverse effect on a party. This means that not every technical violation is considered significant—only those with serious consequences, such as threatening the enforceability of the agreement, creating regulatory exposure, or impairing the value of the deal.

For example, in mergers and acquisitions, the term “material” often appears in warranties and closing conditions. Its meaning can vary widely, from indicating something that is more than trivial to signaling a deal-breaking issue. Because of this ambiguity, businesses and courts frequently debate what qualifies as “material” in a given transaction.

Judicial Standards for Materiality

Courts generally evaluate materiality by asking whether a reasonable person would consider the fact, issue, or breach important when making a decision. In litigation, evidence is material if it directly affects the outcome of the case, not if it is tangential or merely cumulative.

Materiality also operates as a threshold test: only facts and breaches considered material are legally actionable. For example, a minor procedural error may not matter, but a failure that undermines the purpose of the contract or misleads the other party likely meets the standard.

Judges often balance:

  • The extent of harm caused by the alleged breach or misrepresentation.
  • The purpose of the contract and whether the breach defeats it.
  • Reasonable reliance by the affected party.

This approach reflects the law’s emphasis on fairness and practicality—ensuring remedies are reserved for significant, not trivial, disputes.

Materiality in Business and Securities Law

Materiality plays a particularly important role in business law and securities regulation. In securities law, a fact is material if there is a substantial likelihood that a reasonable investor would view it as significantly altering the “total mix” of information available. This definition ensures that companies disclose all information investors need to make informed decisions.

In corporate transactions, ambiguous phrases such as “material adverse change” (MAC) or “material adverse effect” (MAE) clauses can determine whether a buyer may walk away from a deal. Courts interpret these terms narrowly, generally requiring that the effect be durationally significant and cause a substantial negative impact on the company’s financial health or operations

Frequently Asked Questions

1. What does material law mean in contracts?

Material law refers to provisions in a contract or legal framework whose violation would significantly harm one party, often allowing remedies or termination.

2. How do courts decide if something is material?

Courts consider whether a reasonable person would view the fact, breach, or evidence as significant to the dispute’s outcome or contractual obligations.

3. What is an example of a material fact?

A misrepresentation of financial statements during a merger is a material fact, since it directly influences whether the other party agrees to the deal.

4. What is a material breach of contract?

A material breach is a failure to perform that goes to the heart of the contract, such as nonpayment, making it possible for the other party to sue or terminate the contract.

5. Why is materiality important in business law?

Materiality ensures that only significant information, breaches, or issues affect enforceability and liability, protecting against claims based on trivial or minor matters.

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