Termination of a Contract 18/04/ :11 AM

Transcription

1 Termination of a Contract 18/04/ :11 AM There are 2 ways in which a contract may be terminated by the agreement of the parties: 1. Termination according to the terms of the contract 2. Termination by a separate contract between the parties Rights to terminate may be express or implied. Termination under the original contract: Express powers to terminate Parties usually include an express term which stipulates when or how their contract may be terminated Often they will specify a procedure such as 2 weeks notice Implied right to terminate a contract of otherwise indefinite duration Where a contract is silent as to its duration the court may imply a right for one or both parties to terminate the contract Crawford Fitting v Sydney valve & fitting Facts: In 1969 Crawford appointed Sydney valve (the distributor) as exclusive distributor of its products in NSW The distributor agreed not to deal in any other products In 1984 Crawford gave Sydney valve six months notice of termination of the agreement Rogers J held that the reasonable period of notice should have been two years Priestly JA: Six months notice of termination were not breaches of contract Once the notices of termination were given, one of three possibilities had to come to pass for each distributor o Either: o I) leave field of activity o II) continue business in the same field and partly in other fields o III) remain substantially in the same field in direct competition with either the appellants or their products There was an aspect of unfairness in the fact that the contracts were terminated, not necessarily the length of notice given before termination

2 There was an implied term concerning termination did not provide for any payment of compensation for loss of a long standing agreement McHugh JA: Whether a commercial agreement for an indefinite period may be terminated depends on whether the agreement contains an implied term to that effect Determining whether the term can be constructed requires examination of the words of the parties, the subject matter of the agreement, the circumstances in which it was made and the provisions to which the parties have or have not agreed. Although there is a presumption against implying a term that an agreement is terminable, ordinarily the nature of a commercial agreement will lead to the conclusion that the parties have intended for it to be terminable on notice Reasonableness of the period of notice depends on the circumstances: period of notice must be sufficiently long to enable the recipient to deploy his labour and fruition and to wind up the association in a businesslike manner The reasonableness of a notice period does not take account of the expenditure outlaid by the recipient of the notice or his efforts in creating conditions which will enable profits to be earned in the future A contract for an indefinite period will sometimes contain an implied term that it will continue for a reasonable period If a person in the initial stages of a business arrangement spends money in developing the business, it provides a ground for implying a term that the business is to continue for a reasonable period. If during the contract, a party, acting within the scope of the agreement, engages in extraordinary expenditure, that factor must be taken into account when determining the reasonableness of notice given The prospect of obtaining profits in the future is not a relevant factor to be taken into account The chief purpose of a notice period is to enable the parties to bring to an end in an orderly way, a relationship which has existed for a reasonable period of time

3 In the present case, the appellants claimed that the agreement had existed or a reasonable period Distributors have failed to provide that the notice given by Crawford was unreasonable They have neglected to show that if they had had 2 years notice they would be in a better position than if the termination after 6 months notice Termination by subsequent agreement Express agreement Parties may make a subsequent agreement to terminate their contract Agreement to terminate an existing agreement must comply with the ordinary rules of contract formation including consideration Where both parties still have obligations each party will provide consideration in agreeing to release the other party from his or her obligations The need for consideration requires that a distinction be drawn between contracts that remain at least partly unperformed on each side (executory contracts) and contracts that have been fully performed by one party Executory contracts may be discharged by mutual agreement In the case of a contract that has been fully performed by one party, the party who has not performed cannot provide consideration by agreeing to release the performing party from his or her obligations But where one party has already completely performed original contract, the other party would be relieved from her outstanding performance without giving up anything. To discharge such a contract, parties must rely on a deed or make use of an agreement known as an accord and satisfaction Accord and satisfaction Is the purchase of a release from an obligation by means of any valuable consideration not being the actual performance of the obligation itself The accord is the agreement by which the obligation is discharged

4 The satisfaction is the consideration which makes the agreement operative Termination for breach of contract Rights conferred by the common law A party may also be entitled to terminate where the other party rejects his or her obligations under the contract regardless of whether the affected party decides to terminate, he or she will have a right to damages to compensate for loss caused by breach of contract when the affected party seeks to terminate the other party may argue that the right to terminate has been lost by some conduct on the part of the affected party What constitutes a breach of contract? A breach occurs when a party fails to perform at the time or to the standard required by the contract When is there a right to terminate for breach at common law Whether there is a right to terminate for a breach depends on the classification of the breached term: three-fold classification of terms 1. If a term is a condition, the aggrieved party (the party who has been negatively affected by the breach) will be entitled to terminate for any breach of that term by the other party regardless of the gravity or consequences of that breach. Damages will compensate for any loses 2. If the term is a warranty, the aggrieved party will not be entitled to terminate merely by reason of a breach, although damages to compensate are available 3. If a term is an intermediate or innominate term, the aggrieved party s right to terminate depends on the gravity of the term. If the breach is likely to have serious consequences for further performance of the contract then the aggrieved party has rights to terminate in addition to claiming losses. First step in deciding whether there is a right to terminate is to determine the classification Terms will generally only be classified as a warranty where required by statute

5 In the absence of a clearly expressed intention to the contrary, a term will only be properly classified as a warranty if it is such that no possible breach could give rise to an event which would deprive the aggrieved party of substantially the whole of the benefit if it was intended she or he should receive from the contract Termination for breach of a condition Whether a term is classified as a condition is determined as a matter of construction of the contract in question The test is highlighted in Tramways: o Depends upon the intention of the parties as appearing in or from the contract o The test of essentiality is whether it appears from the general nature of the contract, or from some particular term that the promise is of such importance to the promise that he would not have entered into the contract unless he had been assured of a strict or substantial performance of the promise and this ought to be apparent to the promissor Tramways advertising v Luna Park Facts: Tramways carried on the business of advertising on trams for its lients Agreed to exhibit for three seasons advertising material on the roof of trams for Luna park In a letter which was admitted as part of the contract, tramways guaranteed that these boards will be on the track at least 8 hours a day throughout the season After contract was in operation for 2 seasons, luna park argued that each and every board was not on display for 8 hours a day and it did not deem itself bound by the contract Tramways admitted that the service had not been provided but contended that the obligation imposed by the contract was performed if during each season the boards were displayed for an average of 8 hours per day Tramways sued for 86 thousand pounds being the charge for a calendar month at the beginning of the third season

6 Jordan CJ: Necessary to remember that: 1. The breach may extend to all r only some promises of the defaulting party 2. The promises broken may be important or unimportant 3. The breach of any particular promise may be substantial or trivial 4. The breach may occur a) when the innocent party has not yet performed any or some of the promises or after he has performed them all b) when the innocent party has received no performance from the defaulting party, or has received performance in whole or part; and 5. The resultant rights of the innocent party and the nature of the remedies available to him may depend on some or all of these matters if a condition has been broken (essential promise) the innocent party has the right to treat himself as discharged from the contract and to recover damages if it is a warranty (non-essential) only the latter alternative is available whether it is a condition or warranty depends on the intention of the parties as appearing in or from the contract test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular terms that the promise is of such importance that the promisee would not have entered into the agreement unless he was assured of the promise if he contracted in reliance upon the promise, any breach will ordinarily justify a discharge if an essential breach occurs when nothing has yet been done to perform the contract the innocent party, if he chooses may by notice to the defaulting party, exercise his right as discharging the obligations and sue for damages if when the breach is discovered the position is that the defaulting party has wholly performed the contract the innocent party has accepted performance in such a way that he can no longer reject it, he is remitted to his remedy by way of damages

7 if he is still in the position to reject performance, he may determine the contract, refuse to perform further, recover any payments made as on a total failure of consideration and recover damages If a party who becomes entitled to put an end to the contract because of a breach does not do so when he becomes aware of the breach, he loses his right and is remitted to his remedy by way of damages only 1) if, notwithstanding knowledge of the breach, he proceeds to do some act, referable to the contract, which could only be properly done by him by virtue of the contract treated as a subsisting contract 2) if the party in default proceeds to carry on with the performance at the request of the innocent party, made or given with knowledge of the breach the innocent party does not lose his right of putting an end to the contract merely by insisting that the breach shall be remedied; if he takes this course then 1) as a general rule, he cannot afterwards exercise the right without giving reasonable notice 2) he loses his right if, before he exercises it, the defaulting party acquires and exercises a right to be relieved from the performance of the contract High Court: Latham CJ The plaintiff did not perform the contract in accordance with the terms The extent of the breach cannot be determined because there is no way of telling exactly how many hours luna park missed out on This present case is a partial failure to perform the contract and The defendant has the right to determine the contract for two reasons: o 1) by reason of the plaintiif s actual breaches of the contract o 2) by reason of the plaintiff s evident intention to continue to perform the contract in the future in the same manner as the past

8 this term was essential not a warranty and therefore the breach allows the defendant not only to sue for damages but to have terminated the contract the essential nature of the term can be seen in the language we guarantee also, payment was to be given when all the boards were to be displayed at the same time There was also a repudiation of the contract by Tramways - Not only did they not have the trams on the tracks for 8 hours every day but they insisted that they would continue to not do so they clearly indicated an intention not to perform.

9 Lecture 1 18/04/ :11 AM Termination by agreement Most contracts are terminated by performance, it ends after the promises have been performed Two situations Termination under the original contract Termination under a subsequent agreement a further contract is entered into by the paries Termination under the original contract Most commercial contracts stipulated how or when they may be terminated Contract may also stipulate the contract is dependent on a condition: eg want to sell your car and it s subject that it is road worthy but it is not promised, if you fail to get road worthy the contract ends subject to failure to a contingent condition The contract may expressly provide for its termination Parties typically do not intend to be bound forever yet they may not have specified an end date May be appropriate for the court to imply a term allowing the parties to terminate by notice Crawford Fitting v Sydney valve Facts: Crawford American company who were a manufacturer of valves and fittings Entered into a distributorship agreement with Sydney valves which appointed Sydney company as distributor which were supplied by Crawford Distribution contract did not stipulate how it would end or the length of time that the contract would go for Issues: Crawford wanted to end the contract and gave 6 months notice Sydney valve were unhappy and did not want the contract to be terminated so they challenged the termination Whether Implied right to terminate an indefinite contract What Period of time is required for reasonable notice to terminate Held:

10 An indefinite commercial contract can be implied to terminate on reasonable notice If the contract is indefinite, the parties would not have intended it to go on for ever and therefore court can imply right to terminate but on reasonable notice Court needed to consider what was reasonable notice, found that 6 months was valid Relevant factors re: reasonable notice Allowing parties to bring their relationship to an end in an orderly way and having a reasonable opportunity to enter into alternative arrangements and wind up matters Cannot simply end a contract within a number of days Sydney valve needed time to tie up loose ends Must be able to deploy labour and equipment and to terminate the association between the two parties in a business-like matter Long enough to enable distributor to recoup extraordinary expenditure or effort (not ordinary effort expenditure) Termination by subsequent agreement A contract to end a contract requires consideration No issue where neither party has completely performed original contract, as the consideration is the mutual release of remaining obligations Where one party has already completely performed original contract the other party would be relieved from her outstanding performance without giving up anything Consideration can t be the release of obligations because one party has already performed all their obligations To make the new contract binding you need to find fresh consideration or execute that contract as a deed Deed: A form of document that can be used if there is an issue with consideration. Legally effective. Other than a deed: Provide extra consideration: any sum of money in order to make the subsequent contract effective. Release from obligations under the contract if you promise to pay me $1

11 Termination for breach of a condition or serious breach of an immediate term What is a breach: A breach of a contract occurs whenever one of the parties to the agreement did not perform their obligations as required under the contract Types of breach Failure to perform: occurs after time for performance has expired; three types o No performance o Defective performance: you can perform but it s faulty, you do not give the full amount of money eg o Delayed: you may not have performed when you re obliged to perform under the contract Anticipatory breach: occurs before performance is due. It seems as though you will not be able to fulfil your obligations General rule: a breach of contract does not require a fault. The person may simply not be able to fulfil their obligations but it is still considered a breach Identify the breach The contractual obligation and nature of the non-performance needs to be identified. Pinpoint what the obligation was and how they did not fulfil this obligation. Classification of terms For the purpose of the right to terminate, three types of terms must be distinguished Condition Warranty Intermediate term Damages/termination for breach All breaches give rise to damages (compensation for loss) for a breach of a particular term Only some breaches (relatively rare) give rise to terminate the contract (and claim damages for loss of bargain )

12 If they choose to continue on with the contract despite a breach, the party can still claim damages but not a loss of bargain We are not looking at whether the party has a right to damages because they always do, we are deciding whether they have a right to terminate the contract because of the breach. They have a right to choose to terminate the contract or continue on. If they end the contract the compensation will be the loss of the whole contract not being performed, these damages will generally be significant Why would a party want to terminate: o To claim loss of bargain o Have a better offer elsewhere o The whole relationship is broken down and they cannot work feasibly o They may not want to perform their obligations under the contract, they may not want to make a large payment for eg Only the following breaches allow termination Breach of a condition Serious breach of a intermediate term Repudiation First rule: If the breached term is a condition the aggrieved party will be entitled to terminate for any breach of that term if it was of little gravity or consequence Second rule If the breached term is a warranty there is only a right to damages, no right to terminate the contract Third rule If the term is an intermediate term (Can be called innominate terms, inbetween a condition and a warranty) the aggrieved party may be entitled to terminate depending on the gravity and consequences of the breach. Is it a condition or a warranty?

13 1. does a statute characterise it for you? Eg Sale of Goods Act (Acros v Ronaasen) eg goods are fit for consumption 2. Have the parties characterised themselves in the contract (Schuler) Just because the parties characterised themselves as something does not mean they intended it to be a condition in a legal sense 3. If not, you must work it out as a matter of construction, identifying the intentions of the parties (Tramways Advertising v Luna Park) What is a condition? A condition is an essential term that goes to the root of the contract Acros v Ronaasen Facts: English company who bought timber to make barrels Contract prescribed the length of the pieces of wood, ½ inch thick Some of the timber was fractionally thicker which made no difference to the use of the wood The buyer terminated the contract Held: Correspondence with description was a condition under the Sale of Goods legislation The term was found to be a condition Where a term is classified as a condition, there is a right to terminate regardless of the gravity of the breach Commercial/economic motivation for terminating the contract The price of timber had fell in between the signage of the contract and the breach, they wanted to buy the timber elsewhere to make money Express classification in conract Parties can define nature of terms in contract Terminology used by parties is not decisive Goods act 1958 s 16(2) stipulation may be a condition though called a warranty in a contract for the sale of goods Sometimes the phrase terms and conditions do not necessarily mean that all terms are conditions it may be laymen s terms not legal terms.

14 Schuler v Wickman Machine Tools Facts Schuler was a manufacturer of machines to make cars Wickman were the sole distributors for a 4 ½ year period Clause in the contract 7(b): it shall be a) condition of this agreement that i) Wickman shall send its representatives to visit the six largest UK motor manufacturers at least once every week for the purpose of soliciting orders for panel presses Required them to make 1400 visits over the 4 and a half year period Issue: Identify the breach: Wickman did not make al 1400 visits Therefore they can get damages for that breach, the issue here is can they can terminate the contract? Yes if the term was a condition in the technical sense (an essential term going to the root of the contract which the parties contemplated that any breach would give rise to terminate) No if the term was a condition only in the popular, layman s sense (a term or provision of the contract) This case did not refer to intermediate terms because they did not exist in the law at the time, the classification was If it was a condition or a warranty Held: Not a condition, despite the clause stating it shall be a condition Schuler therefore had no right to terminate The parties did not really mean that it was a condition in the technical sense of the word If it is clear that the parties intended a condition in the legal sense then it is a condition. Here it was not clear. Condition ma have many different meanings Just because it is called a condition isn t conclusive if unclear the words will decide what the intention of the parties having regard to the terms and subject matter of the contract Relevant consideration: where a particular construction leads to a very unreasonable result (where the nature of the term is such that breach is likely) it is unlikely that strict compliance is requires

15 It would be unreasonable that wickman would have to go to all 1400 visits and if they failed to do so the contract could be terminated Drafting of the contract was obscure and Ill-thought-out Intention of the parties Ask: what was the objective intention of the parties (having regard to the terms of the contract and surrounding circumstances)? Apply the Tramways essentiality test Tramways Advertising v Luna Park Facts: Contract between Luna park and tramways, contract to advertise 53 boards on trams 2 documents that made up the contract, letter and a formal contract contract said we guarantee that these boards will be on the tracks at least 8 hours per day throughout your season tramways position sufficient if boards on tracks for average of at least 8 hours per day luna park position each and every board must be displayed for at least 8 hours a day not only for an average of 8 hours Luna park found that they had breached the contract because each board had not been on the tracks for 8 hours exactly Tramways kept advertising even though Luna Park had purported to terminate and sued for the advertising fee High court agreed with Luna Park s position Tramways was in breach therefore luna Park was entitled to damages for the breach but were they entitled to terminate the contract? Test: Jordan CJ The test of essentiality is whether it appears from the general nature of the contract, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or substantial performance of the promise, as the case may be and this ought to have been apparent to the promissor. High court held:

16 Clause was a condition: relevant factors o Importance/essentiality derived from the words we guarantee o Payment not to commence until all 53 boards were all displayed (completeness of the display was of importance to the parties) o Preliminary correspondence demonstrated importance of continuity of display Therefore, Luna park could terminate the contract for breach of condition There was also a repudiation (refusal to fulfil an agreement) of the contract by Tramways not only did they have the trams on the tracks for 8 hours every day but they insisted that they would continue not to do so they clearly indicated an intention not to perform Luna Park was entitled to loss of bargain: received 1 shilling Associated newspapers v Bancks Facts: 10 year contract for one page cartoon for Sunday newspaper to be published on front page of comic section Bancks was a famous cartoonist who created a ginger Meggs character He already had a contract with them and the new contract was a renewal At the time Bancks was being courted by another rival newspaper owned by Frank Packer Negotiated a very large salary and therefore it was of importance that his cartoon was not only displayed but on the front page On several occasions (3) the newspaper published the cartoon on other pages Bancks terminated the contract and signed up with the rival newspaper Associated newspaper said the termination was unlawful and wanted to prevent him from drawing the cartoon for another company Held:

17 High court held that it was a condition Banks could terminate the contract and claim breaches It was such importance to bancks that it was displayed on the front and he would not have entered into the contract if the company did not perform the obligation They looked at what bancks was obliged to do: a weekly cartoon, that obligation was a condition so it would be strange if banck s obligation was a condition but the company s would only be a warranty Continuity, integrity of the cartoon (published as a whole) and most conspicuous page = importance to an artist Newspapers conduct was also repudiation Intermediate terms: Originally, only two types of term were known: Condition: any breach allows termination Warranty: no breach allows termination This regime was inflexible The seriousness of a breach was irrelevant (acros) The courts now recognise intermediate terms; termination is allowed if the breach is serious The right to terminate depends on the gravity of the breach and its consequences Can terminate for breach that is serious /goes to the root of the contract/ deprives the innocent party of substantially the whole benefit of the contract Hongkong Fir Shipping Co v Kawasaki Facts Hong Kong Fir owned ship and hired it out to Kawasaki for 24 months Seaworthiness clause she being in every way fitted for ordinary cargo service The ship was delayed in Osaka for 15 weeks for repairs and was out of action for 7 months out of the 24 months Kawasaki terminated the contract Issue:

18 Was the termination valid? Hong Kong Fir argued it was wrongful Held: Recognised 3 categories of terms: Condition: simple contractual undertaking every breach must deprive the innocent party of substantially the whole benefit Warranty simply contractual undertaking no breach can deprive the party not in default of substantially the whole benefit Intermediate term complex contractual undertaking breach may or may not deprive the innocent party of substantially the whole benefit (as intended by the parties) of the contract there may be many different types of breach ranging from the trivial to the important Court found the clause was an intermediate term breach may or may not deprive the party of substantially the whole benefit of the contract can be breached by trivial defects (may be an anchor or a nail missing) which can be easily remedied or it can be breached in a serious way (the whole engine might not work) If there were only two categories of clauses it would be very inflexible, if it was a minor breach that could still give rise to termination of the 24 month charter party Court didn t think it was the intention of the parties to terminate for trivial breaches Test for when the breach will justify termination does the occurrence of the event deprive the party who has further undertaking still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings Lord Diplock if the breach deprives the aggrieved party of the whole benefit of the contract you can terminate for breach Held: Delay (7 months out of 24) not likely to deprive substantially the whole benefit of the contract (ship was still available for 17 months) Significant breach of the contract but no right to terminate The breach can be remedied with damages

19 Ankar v national Westminster Finance Facts: National Westminster finance (formerly lombard) was paid 125k in security by Ankar Obligations on Lombard in the security deposit agreement Clause 8: to notify ankar if the manufacturing company proposes to assign its interest in the leased machinery It s in ankar s interest to know whether the manufacturing company keeps ownership in the interest Clause 9: to notify ankar if the manufacturing company is in default under the lease agreement Lombard s breaches: o Agreed to the manufacturing company assigning the machinery without informing ankar o Failed to advise that the manufacturing company was in default Ankar sought a court declaration that it could terminate the security deposit agreement and be released from its guarantee (125k back) Ankar would want to terminate because they did not want to forego that 125 thousand Instead of going ahead and terminating a contract they wanted to get a court declaration to show that they have the right to do so if there is any uncertainty If you terminate wrongfully it means that you repudiating the contract and then the other party has a right to terminate against you and you could bet he one having to pay loss of bargain damages Issues: Factoring favouring interpretation as conditions Damages not a way of enforcing the promises: too difficult to prove Obligation to give notice so that Ankar could take actions to safeguard its position and interests Ankar would be liable but the machinery on which the liability was owed was no longer owned by the lessee It is not just an ordinary condition, but it is a surety contract with special relationship between surety and creditor

20 Factors favouring interpretation as not conditions Not expressed to be condotions No time for fixed notice Language not clear Held: Was a condition Ankar got back 125 In obiter they approved intermediate terms Courts won t too readily construe a clause as a condition preference for construction that encourages performance (not avoidable) of a contract Koompathoo v Sanpine Facts: Koompathoo owned land north of Sydney Entered into an agreement with Sanpine to develop the land and contributed management and financial expertise Project was controversial and ended up that it failed Administrator wanted to know about the financial situation of the joint venture but couldn t because Sanpine did not keep the financial records as they were supposed to Sanpine breached obligaions keeping proper books of accounts and financial records Koompathoo s administrator terminated on their behalf Held: The relevant clauses were intermediate terms High court recognised these as part of Australian law If you just made a few mistakes in financial records or you don t have any financial records at all Intermediate terms offer practical utility and gives more flexibility to the law of contract Kampathoo s termination was valid because the breaches were significant They went to the root of the contract and deprived koompathoo of a substantial part of the benefit for which it contracted Having regard to the nature of the contract and the relationship it creates; the nature of the term; the kind and the degree of the

21 breach; the consequences of the breach for the other party and the adequacy of the damages Court analysed these factors and breaches and said that they did suffice as part of the test Obligations were very important, that the financial records were kept and both parties knew the finances of the company Kirby (dissent) No need to invent a third category and his preferred approach is to determine whether a term is essential or inessential Breach of a warranty: No breach of warranty gives right to terminate, only damages It is preferable to classify a term as an intermediate term (if it can be breached in more than one way with varying degrees of seriousness) as it gives the court more flexibility A term will only be a warranty if no possible breach could give rise to an event which would deprive the aggrieved party of substantially the whole benefit of the contract Terms are generally only warranties where classified as such under a statute Consequences of termination: Termination is frozen on termination Anything after point of termination seizes Relieves both parties from further performance Terminate with care, as wrongful termination is a repudiation of the contract and gives the other party the right to terminate and obtain damages: o A party who without lawful justification purports to treat himself as discharged from the obligations of the contract for a supposed essential breach of the party is himself guilty of repudiating the contract and thereby vests in the other party a right lawfully to put an end to the contract

22 Principles book week 1 18/04/ :11 AM Performance and breach Contractual disputes A breach of contract occurs where one party does not perform his or her obligations in accordance with the terms of the contract Performance required by the contract Whether a breach occurs depends on the compliance with the terms of the contract irrespective of whether the party was blameworthy or was affected by events outside their control Important issues in regards to a breach is the standard of performance required and the time at which performance is required Sometimes the standard of performance and time will be specified In instances where it is not specified, the standard and time may be implied by the court Order of performance A contract may specify the order in which parties are to perform their obligations, if not it the order is a matter of construction Responses to a breach of contract Where the aggrieved party alleges that the other party has breached the contract, the other party may: o acknowledge the breach and try to rectify it o dispute that the breach has occurred o argue that there is a term in the contract limiting the liability for the breach o to excuse his or the failure to perform in accordance with the terms of the contract: argue that the contract was not properly formed or there was a an excuse for the failure to perform, that the contract was frustrated or that the enforceability of the contract is affected by misinformation, an abuse of power or illegality Remedies and the right to terminate If a breach is established, the aggrieved party will have a right to damages If the contract has been fully performed this may be a sufficient remedy

23 If not, the aggrieved party may claim damages for any losses occasioned by the breach and elect to continue with performance The aggrieved party may also seek the remedy of specific performance Termination Termination releases the parties from any obligation to further perform the contract The right to terminate may arise in a number of different ways indluding: o The agreement of the parties o Non-fulfilment of a contingent condition o Breach of an intermediate term which is sufficiently serious o Fundamental breach or repudiation Termination vs rescission Termination has a prospective effect, any rights accrued prior to termination continue unaffected and may be enforced by the relevant party Rescission is the remedy often granted where the contract is found to be spoiled by reason of misrepresentation, mistake, undue influence or unconscionable dealing Rescission has a retrospective effect the contract is unwound and the parties are restored to the position they were in prior to the contract being made Categories of agreement to terminate The parties original contract may include an express term for its termination Parties may make a subsequent agreement expressly terminating the original contract The courts may find an implied agreement to terminate the contract Termination under the original contract Express powers to terminate Parties may fix a period of time to the contract, after this expires the contract will automatically come to an end Parties might agree that one or both of them have the right to terminate