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2. Whether the Breach of the Offer-in-Compromise
Was Material
a. Applicable Law
“An accepted offer in compromise is properly analyzed as a
contract between the parties.” Dutton v. Commissioner, 122 T.C.
133, 138 (2004). Offers in compromise are governed by “general
principles of contract law.” Id. “If the plaintiff’s breach is
material and sufficiently serious, the defendant’s obligation to
perform may be discharged. * * * Not so, however, if the
plaintiff’s breach is comparatively minor.” TXO Prod. Corp. v.
Page Farms, Inc., 698 S.W.2d 791, 793 (Ark. 1985).
In determining whether a failure to perform is material, the
following five circumstances are significant:
In determining whether a failure to render or to offer
performance is material, the following circumstances
are significant:
(a) the extent to which the injured party will be
deprived of the benefit which he reasonably expected;
(b) the extent to which the injured party can be
adequately compensated for the part of that benefit of
which he will be deprived;
(c) the extent to which the party failing to
perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to
perform or to offer to perform will cure his failure,
taking account of all the circumstances including any
reasonable assurances;
(e) the extent to which the behavior of the party
failing to perform or to offer to perform comports with
standards of good faith and fair dealing. [1
Restatement, Contracts 2d, sec. 241 (1981).]
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