Everything about Materiality Law totally explained
Materiality is a
legal term which can have different meanings, depending on context. When speaking of facts, the term generally means a fact which is "significant to the issue or matter at hand".
In the law of evidence
An item of
evidence is said to be material if it has some logical connection to a fact of consequence to the outcome of a
case. Materiality, along with
probative value, is one of the two characteristics which makes a given item of evidence
relevant. This is largely dependent upon the elements of the
cause of action the
plaintiff seeks to prove, or that the
prosecutor must prove in a
criminal case in order to secure a conviction. Which issues must be factually proven are therefore a product of the underlying
substantive law.
In corporate and securities law
Within the context of
corporate and
securities law in the
United States, a fact is defined as material if there's a substantial likelihood that a reasonable
shareholder would consider it important in deciding how to vote. In this regard, it's similar to the
accounting term of the same name.
Materiality is particularly important in the context of securities law, because under the
Securities Exchange Act of 1934, a company can be held civilly or criminally liable for false, misleading, or omitted statements of fact in
proxy statements and other documents, if the fact in question is found by the court to have been material.
In contract law
In the law of
contracts, a
material term in a contract is a term or provision of a contract which concerns significant issues, such as the subject matter, price, quantity, the type of work to be done, and terms of payment or performance.
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