Contracts

Material Term

Learn about the definition for this legal term.

What is Material Term?

A material term is a term so critical to a contract that the parties would not have entered into the contract without it. Material terms generally include things such as price, quantity, quality, or scope of the work. If a material term is altered with both parties’ consent or is not defined clearly, the contract will be void and unenforceable. Ambiguity of material terms in a contract is often used as an affirmative defense in breach of contract cases.

Case Examples

  • Employment Contracts: In Herring v. Lapolla Indus., Inc., No. 2:12-CV-2705-RMG, 2013 WL 12148850, at *3 (D.S.C. Nov. 26, 2013), a former employee countersued his employer, claiming that the nondisclosure agreement he had signed did not sufficiently define the term “confidential information” to put him on notice of what constituted protected information.
  • Franchise Agreements: When a franchise is transferred to new owners, courts have determined that it is reasonable for the franchisor to require the new owners to sign a new franchise agreement to ensure that both parties understand and agree to the same set of material terms. See Oakland Fam. Restaurants, Inc. v. Am. Dairy Queen Corp., 728 F. Supp. 3d 703, 720 (E.D. Mich. 2024), aff'd, No. 24-1331, 2025 WL 789555 (6th Cir. Mar. 12, 2025).
  • Subcontracting: Scope of work is considered a material term when dealing with a subcontracting agreement. For example, in Ringdahl Architects, Inc. v. Swendsrud Constr., Inc., No. CV 16-1060 (DWF/LIB), 2017 WL 5157605, at *1 (D. Minn. Nov. 6, 2017) the court sided with the plaintiff and required the defendant to pay them for work that had been completed, as the scope of work and payment schedule were not clearly defined.

Things to consider with material terms

  • Is the term essential to the contract?
  • Did one party change the term?
  • Was the term clearly defined?
  • Did the parties’ communication indicate that the term was material to the contract?

Further Reading

For more detailed information, see our related Contracts terms:

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