Termination of a Contract

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Termination of a Contract

Termination of a Contract

Following are some cases where a contract can be terminated:

1.A contract becomes terminated through performance  where both parties have fully performed their contractual obligations. If one party does not fully perform the contract this will amount to a breach of contract and the other party may have a claim for damages unless the contract has been frustrated. If the non-performance amounts to a repudiatory breach (breach of condition) the other party will be released from their obligations. Where a contract is one where the price is payable on completion, then completion is generally required in order to terminate the contract. This is often expressed in the terms of being a condition precedent.

This general rule was established in Cutter v. Powell (1795), where “six weeks into the voyage the claimant’s husband died. The claimant sought to claim a sum to represent the six weeks work undertaken. Held: The wife’s action failed. Payment was on condition that he worked the ship to Liverpool, since he did not fulfill this condition the widow was entitled to nothing.

2. A contract may be terminated by agreement  when both parties agree to bring the contract to an end and release each other from their contractual obligations. For a contract to be terminated through agreement there must be Accord (agreement) & Satisfaction (consideration) where each party must agree to end the contract. The agreement must be freely given.  Both parties must also provide consideration. If both parties have continuing obligations then generally the consideration will be simply each of them giving up their rights under the contract. The only time consideration becomes an issue is where one party has fully performed their part of the contract when the other has not. The non-performing party must then provide consideration to make the agreement binding. Also if the agreement is made by deed there is no requirement to provide consideration. There is in effect a contract to end a contract.

3. A contract may be terminated by frustration . A contract may be frustrated where there exists a change in circumstances, after the contract was made, which is not the fault of either of the parties, which renders the contract either impossible to perform or deprives the contract of its commercial purpose. Where a contract is found to be frustrated, each party is terminated from future obligations under the contract and neither party may sue for breach.

 A contract will not be frustrated where:

  1. Impossibility of performance is the fault of either of the parties
  2. Where there is a force majeure clause

(Not exhausting list)

4. A contract may, in some circumstances, be terminated by a breach of contract . Where there exists a breach of condition (as oppose to breach of warranty) this will enable the innocent party the right to repudiate the contract (bring the contract to an end) in addition to claiming damages. A contract cannot be terminated by a breach of warranty.

5. Anticipatory breach

Describes a declaration by the promising party to acontract that he or she does not intend to live up to his or her obligations under thecontract.

Where a party indicates their intention not to perform their contractual obligations, the innocent party is not obliged to wait for the breach to actually occur before they bring their action for breach:Hochster v. De la Tour (1853):  This gives the innocent party the option to either sue immediately or continue with the contract themselves and wait for the breach to occur before bringing their action.

Our Company has experience in various contractual agreements including shipping, oil drilling and many other types of contracts. For more information and guidance regarding Breach of Contracts and Procedures please email our firm – iMPK Global Business Law Firm – Cyprus Lawyers, at info@impklawyers.com or visit our website at https://impklawyers.com  and use our live chat. Tel. +357 99345000 – Fax +357 25 660097.

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