Chapter 25 - IT Contract Formation

25.8.3 Material breach provision in IT contracts

Most contracts allow a party to terminate the contract for the other party's "material breach." It is often difficult to determine whether a particular set of facts amounts to "material breach." Agencies should identify key scenarios which would constitute "material breach" and include those in the IT contract. If repeated small breaches could also constitute a "material breach", the IT contract should include that language. Commonwealth agency contracts usually provide that the supplier should not have a right to terminate for breach for any reason, particularly for a mission critical application or solution. If the supplier has the right to terminate the contract, the impact to the agency, project or Commonwealth as a whole, could be paramount, because our common goal is uninterrupted business on behalf of the citizens. If there is a material breach, outside of payment disputes, the agency and the supplier should work to cure the breach and, if necessary, escalate the issue. Your OAG can offer additional guidance for your particular agency and project.