There are various reasons why a contract may be terminated, for example where an essential term is breached, the contract expires, a party repudiates or exercises an explicit right to terminate provided in the contract. However, a party must only terminate a contract where they have a legal right to do so otherwise the other party may be able to insist on performance or compensation. There are a few important considerations in relation to terminating a contract. Firstly, termination is not automatic. Whilst the other party breaching or repudiating the contract gives rise to a right to terminate, the parties still must then expressly elect to terminate the contract in order to release their obligations. The specific requirements to meet in order to effectively terminate a contract vary depending on the source of the right to terminate i.e. common law, contract terms or a statute. Contact M+E for further information or assistance drafting, executing and terminating commercial contracts.
