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Termination for breach of contract

The following LexisNexis Dispute Resolution practice note provides comprehensive and up to date legal information covering the identification and the process and implications of ending a contract due to breach.

It includes:

• Termination for breach of contract

• Terminating for breach of contract - has there been a breach?

• Has there been a breach of contract - what were the party’s obligations under the contract (stage 1)?

• The contractual terms

• Construing (interpreting) the contract

• Has there been a breach of contract - did actual performance measure up to party’s obligations (stage 2)?

• In general

• Time of performance and ‘time of the essence’

• Conditions precedent and the ‘principle of futility’

• Events of default

The termination of a contract by reason of one party’s breach of contract arises as follows:

• one party to the contract is in breach of contract

• the relevant breach is an anticipatory breach or a repudiatory breach, and

• the innocent party accepts the breach

This Practice Note outlines each of these prerequisites of termination for breach of contract. It also considers the relationship between repudiatory breach and contractual provisions which give an express right to terminate for 'material breach'.

For general guidance on how to terminate contracts, see Practice Note: How to terminate an agreement.

Terminating for breach of contract—has there been a breach?

The general rule is that a party to a contract must perform precisely what they agreed to do.

If a party fails to do this, they will be in breach of contract.

In order to determine whether a party is in breach of contract, the following two stage approach is taken:

• first, ascertain the scope of the party’s obligations under the contract:

• a party’s obligations under a contract are derived from the terms of the contract, as agreed by the parties, but

• where there is doubt about the meaning of the contract, a court must ascertain that meaning by using recognised principles of interpretation

• next, determine whether the party’s actual performance measures up to their obligations

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