Think before you terminate!

Posted on August 15th, 2017

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If you are thinking of terminating a contract that is of any significance, you must obtain legal advice prior to doing so.

Too often we see people take action to terminate a contract as a result of circumstances that they consider entitle them to terminate the contract and suffer significant consequences as a result.

If you terminate a contract or attempt to terminate a contract in circumstances where you are strictly not entitled to, or do so in an inappropriate manner, the other party may be entitled to treat your termination or attempted termination of the contract as a repudiation of the contract.

A repudiation of the contract is usually categorised as conduct where a party no longer intends to be bound by the terms of the contract. If a party repudiates a contract, the other party may accept this repudiation and terminate the contract suing the repudiating party for damages.

It all boils down to whether or not your termination is valid. If your termination is not valid, you are at risk of the Court viewing your conduct as a repudiation. Therefore it is extremely important that you seek legal advice and take a considered approach prior to taking any action in relation to terminating a contract.

An example of where a party acted too hastily in terminating a contract with dire consequences was illustrated in Dewu Pty Ltd v Fabiano [2015] NSWSC 1915. This was a building contract dispute where the owner (Dewu) purported to terminate the contract as it considered that the building works were defective. Dewu’s position was misconceived at law and the builder (Fabiano) accepted the owner’s purported termination as a repudiation of the building contract and in turn validly terminated the building contract claiming damages as a result. The builder was successful and was awarded damages in the sum of $511,762.00.

Think and seek advice before you terminate!


Lachlan Page, Solicitor at Mullane & Lindsay Solicitors, NewcastleLachlan Page is a Solicitor at Mullane & Lindsay Solicitors and practices extensively in commercial, business and property transactions and adviceIf you require any assistance in this area please contact Lachlan Page to arrange a consultation or contact our Newcastle office.

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