Terminate a Contract

A contract is a legal document that binds at least two parties to one another. A contract requires one or both parties meet obligations detailed in the contract before it is completed. In some instances, contract termination can occur that will make the contract void of legal binding. Only the parties involved in the agreement may terminate a contract.

Impossibility of Performance

A contract typically requires one or more parties to do something, which is called performance. For example, a company may hire and sign a contract to have a public speaker talk at a company event. Once the public speaker fulfills his duties agreed upon in the contract, it is called performance. If for some reason it is impossible for the public speaker to fulfill his duties, it is called impossibility of performance. The company has the right to terminate the contract in the case of an impossibility of performance.

Breach of Contract

When a contract is intentionally not honoured by one party, it is called a breach of contract and is grounds for contract termination. A breach of contract may exist because one party failed to meet his obligations at all or did not meet his obligations fully. A material breach of contract allows the hiring party to seek monetary damages, and an immaterial breach of contract does not allow the party to seek monetary damages. For example, if you purchased a product that did not arrive until a day after the agreed upon delivery date, that is an immaterial breach of contract. However, if your order did not come until two weeks after the delivery date and it affected your business, then that is a material breach of contract.

Prior Agreement

You may terminate a contract if you and the other party have a prior written agreement that calls for a contract termination because of a specific reason. The agreement must give the details of what qualifies as a reason for contract termination. It should also state what actions need to take place for one of the parties to terminate the contract. In most cases, one party must submit a written notice to the other party to terminate the contract.

Rescission

A rescission of a contract is when a contract is terminated because an individual misrepresented themselves, acted illegally or made a mistake. For example, if you bought a house but after further inspection you discover that the seller intentionally hid the poor physical condition of the home, you may possibly terminate the contract. A contract rescission may take place if one party is not old enough to enter a contract or if a elderly person is not able to make legal decisions because of incapacity.

Completion

A contract is essentially terminated once the obligations outlined in the contract are completed. Parties should keep documentation showing that they fulfilled their contract duties. Documentation is helpful if the other party tries to later dispute the fulfilment of your contract obligations. A court of law will require proof of contract fulfilment if a dispute occurs.

Ways in Which Contracts May Be Terminated

Contracts may be brought to an end:

(a) By performance of the parties i.e. each party completing his obligations as stipulated by the contract.

(b) By frustration i.e. events through no fault of the parties that make one party unable to perform the contract. For example:  if one party suffers a prolonged illness which makes him unable to perform the contract.

(c) By lapse of time i.e. if the time limit set for the contract to be executed by both parties has been passed. For example, sellers of real estate usually require that the buyers pay the full balance on the property within a certain time period after the initial down payment has been made.

(d) By the mutual agreement of all parties.

(e)If one of the parties become bankrupt after the contract has been signed.

(f) By changes in law i.e. where a legal contract is rendered illegal through changes in law.

(g) By notice e.g. some firms require that employees give at least one month notice when resigning their positions.

(h) If one party dies.

(i) By breach of contract-When one party defaults on his part of the agreement i.e. he does not perform his part of the contract.

What is Termination of Contract?

Once a party formally agrees to a contract, they become liable under law to fulfill their contractual duties.  Failure to perform the terms stated in the contract can result in a breach of contract lawsuit or other legal liabilities. 

However, there are some conditions under which a contract can be legally terminated before the contractual duties have been fulfilled.  This is known as “termination of contract” and may occur for many different reasons.  Termination of contract is governed by contract laws, which may vary according to each individual state.

When is Termination of Contract Lawful?

Termination of contract is considered to be lawful when a legitimate reason exists to end the contract before performance has been completed.  Some of the more common reasons for termination of contract may include:

§  Impossibility of Performance:  Fulfilling contract terms is called “performance”.  Some situations may make performance of contract terms impossible.  For example, in a contract for a musical concert, the contract may sometimes be terminated if the performer becomes incapacitated. 

§  Instances of Mistake, Fraud, or Misrepresentation:  If the contract was formed under conditions involving mistake, misrepresentation, or fraud, the contract may be terminated, since it was not formed according to sound contract principles.

§  Breach of Contract:  In a contract, both parties usually have duties to fulfill.  If one party fails to perform their duties, the contract may be terminated, and the non-breaching party may be able to recover losses caused by the breach.

§  According to a Prior Agreement:  Termination of contract may occur if the parties had previously formed an agreement regarding contract termination.  For example, the contract itself may have contained a provision stating the conditions under which it may be terminated.  Such a provision is known as a “termination clause”, and is enforceable if both parties agree to the termination terms. 

Thus, it is important that a contract be clearly written and that the parties thoroughly understand their contractual duties.  A sloppily-written contract can result in the contract being unlawfully terminated before it has been completed. 

What Happens When a Contract is terminated?

Contract termination may result in several different legal consequences, which may affect each party differently.  In some cases, the contract termination might not have caused either party any losses.  In such cases, the contract is simply terminated, and the parties are free to create a new one in the future if they so desire.

However, in the majority of cases, termination of contract usually results in losses to one or both parties.   This is common in situations involving a breach of contract terms.  If this happens, the aggrieved party can usually file a claim in court in order to recover losses that they may have incurred.  The non-breaching party may then be eligible to receive a monetary damages award in order to be compensated for their losses.

In some cases a contract may be terminated, but the courts will allow the parties to form a new contract.  This is now as “contract rescission” and is only available under certain circumstances.  Contract rescission is common for claims involving mistake or misrepresentation. 

Do I Need to Speak With a Lawyer for Issues With Termination of Contract?

Termination of contract can often present many legal issues or disputes.  If you have any questions at all about contract termination, you may wish to speak with a contracts lawyer for advice.  An experienced lawyer can help you file a claim in court in order to resolve disputes over termination of contract.  Also, you may wish to work with an attorney when drafting a contract, so that you understand how termination may affect your contract.

Business Law: Five Remedies for Breach of Contracts

 

Remedies for Breach of Contracts

Remedies for Breach of Contracts describes that in any situation in which there is a right, there is also a remedy and a contract gives rise to correlative rights and obligation remedy is the means given by the law for enforcement of a right.

Remedies for Breach of Contracts

Remedies for Breach of Contracts include;

· Damages

· Quantum Meruit

· Specific Performance

· Injection

· Rescission

Damages

Damages as one of the Remedies for Breach of Contracts are monetary compensation allowed to the injured party of the loss for the injuries suffered by him or her as a result of the breach of contract. The fundamental principal is compensation and not punishment. The aim is to put the injured party in the same person he would have been had there been performance. As general rule compensation must be commensurate with the injury or loss sustained arising naturally from the breach if actual loss is not proved, no damages will be awarded.

Damages can occur in as liquidated damages where whatever is awarded is commensurate with the damage penalty estimated and the rewards are in excess a person injured by a breach of contract is under duty of mitigate and that is to say he must take reasonable steps to reduce incidence of loss arising from a breach of contract the plaintiff can’t clam damages of loss which is attributable to his failure to mitigate.

Quantum Meruit

Quantum Meruit is another of the Remedies for Breach of Contracts. It refers to as much as has been done. These may be available to ether parties without claiming damages or compensation for work done it can also be done by claiming reasonable compensations

Specific Performance

One of the Remedies for Breach of Contracts is special performance. It means carrying out the contract as agreed. It is an equitable remedy and it may be granted where monetary compensation is not adequate relief, where there is no standard for asserting the actual damage and where it is probable that the compensation in money can’t be gotten.

Injection

Injection is another of the Remedies for Breach of Contracts. It is a court order restraining a person from doing a particular act.

Rescission

The last but not least of the Remedies for Breach of Contracts is rescission. It occurs when the aggrieved party decides not to perform his part of the contract. He may even sue and be granted rescission by the court in which case he becomes entitled to compensation for any damage which he has sustained through non-fulfilment of the contract.

Conclusion on Remedies for Breach of Contracts

As seen above the five ways to for Remedies for Breach of Contracts are; Damages, Quantum Meruit, Specific Performance, Injection and Rescission.