Before terminating any kind of contract, the underlying requirements have to be present, otherwise the other side can claim ‘repudiation’ on your part and sue you for damages.
For example, in building or technology contracts, contractual breaches may be alleged by the contractor causing delays or making unauthorised variations, missing deadlines, claiming unjustified progress payments, or performing the work negligently.
These elements will have to be proved and will need to amount to ‘substantial breaches.’ For example, expert evidence will need to be provided to show negligent work.
If the contract is terminated without requisite elements of such allegations being proven (or being provable), then it is possible that the other side can blame the terminating party, or or some other factor (e.g. inclement weather) in respect of the alleged breaches, and claim ‘repudiation’ (i.e. none performance of the contract basically) and the damages.
Parties who want to terminate sometimes also classify any alleged non-performance as a ‘repudiation’ and thereafter ‘accept’ the termination.
Again, we emphasise that many such attempts are premature. In order to succeed in such claims parties will need to show that the ‘repudiating’ party conduct clearly showed an unwillingness or inability to perform essential contractual obligations.
If you terminate, it is not unusual for the other party to claim substantial damages for ‘wrongful’ or unlawful termination. This is a great risk for parties invoking termination prematurely.
It is also to be remembered that any damages need to be based on adequate and proper evidence including expert reports which show that the damages were the direct result of say, negligence of a contractor.
The moral of the story is that you need to be very careful before you terminate your contracts. There are many potential traps and you will need adequate advice before you take that important step.
At Papallo Kouchoo Lawyers, we do our utmost to uphold your rights and to ensure that your contractual rights are safeguarded.
If you have any questions, please do not hesitate to contact us for an obligation free professional consultation.
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