LEADING law firm Tollers regularly works with clients needing legal support to end a commercial contract.
Partner Ian Carson, who specialises in dispute resolution, explained: “For example, one party may feel that the other is not fulfilling their side of the bargain; the commercial terms may no longer be acceptable or one party’s business strategy may have changed.
“When entering into a contract, particularly one that is expected to run for a length of time, it is vital to provide for and understand how and when it can be brought to an end.
LEADING law firm Tollers regularly works with clients needing legal support to end a commercial contract.
Partner Ian Carson, who specialises in dispute resolution, explained: “For example, one party may feel that the other is not fulfilling their side of the bargain; the commercial terms may no longer be acceptable or one party’s business strategy may have changed.
“When entering into a contract, particularly one that is expected to run for a length of time, it is vital to provide for and understand how and when it can be brought to an end. If the contract is not for a fixed term and there is no express termination clause, the general rule is that the contract is terminable on reasonable notice.”
The court can only rule on what is considered reasonable notice once the facts and circumstances of the individual case are known. This leads to uncertainty and potentially extra cost, so clear written terms will prove invaluable if a dispute arises and the case goes to court.
Common grounds for termination include:
* The exercise of a break clause subject to notice;
* A defined event;
* A material breach by one party;
* The insolvency of one party.
Where notice is required to trigger a right to terminate, in our experience, it is surprising how often the party seeking to terminate does not take the trouble to check how notice should be given under the contract. It might be notice has to be given by a specific date and served at a specific address and if this is not done then there is a serious risk that the termination will be unlawful.
Where one party is relying on the other party’s breach, it is highly advisable to keep evidence of the alleged breaches and their consequences. It is common for the contract to allow the party in breach an opportunity to remedy the breach if required to do so. In such circumstances, due notice of the requirement to remedy must be given and a record kept of the other party’s response.
With the day-to-day pressures of running a business, it is all too easy to overlook the express requirements that need to be followed in order to terminate a contract lawfully without liability to the other party. Where you are contemplating bringing a contractual relationship to an end, you are strongly advised to take legal advice before embarking on the termination process so that you fully understand the options available and the correct procedures to be followed.
For further information, contact Ian Carson on 01604 258558 or
More information about the firm’s extensive services is available at www.tollers.co.uk
