If a party to a contract does not meet their contractual obligations, the other party may suffer loss. If this loss could have been avoided had the contract been performed, that party may have a cause of action.
It is important to understand:
Knowing whether you can end the contract based on the other party’s repudiation is essential.
Termination without proper cause can itself be a breach. This can open you up to a claim for damages being brought against you.
If you find yourself in a contract dispute, on either side, the first step is to seek legal advice.
Our commercial litigation lawyers assist with a range of contracts and contract disputes. We will ensure you take the right steps to achieve the best result.
A contract is an enforceable agreement between parties. Those bound by the contract are obligated to carry out its terms.
A breach occurs when one party does not fulfil their obligations per the terms of the contract.
This can be frustrating for the other party. As such, the non-breaching party may look to terminate the contract based on the breach.
The remedies available and whether the contract can be terminated will depend on:
A breach does not need to have actually occurred before a party can take action. An “anticipatory breach” will occur if, before they are due to perform a contract term, one party states:
The other party may be able to take action based on this anticipatory breach and not need to wait for it to occur.
If a party you have contracted with informs you they will not be able to carry out the contract, contact a lawyer. You should act quickly to preserve your rights.
Express terms of a contract are:
These terms set out the rights and obligations of each party.
In addition to these express terms, contracts may also carry implied terms. Implied terms are not expressly stated in the contract but are:
Terms can be implied from the presumed intention of the parties based on their actions. They may also exist for practical business purposes. For example, where an “obvious” term is not expressly stated, but:
Terms can also be implied by law. These are “default” terms stemming from common law or legislation. Certain terms apply to all contracts, whereas others apply based on the type of contract. For example:
Some terms, such as those under the Australian Consumer Law, cannot be “contracted out” and apply whether or not they are expressly stated.
It is still important to expressly state the terms that capture your intention. This will ensure the contract aligns with your wants. For this reason, it is imperative to engage a lawyer to either draft or review the contract prior to signing.
Commercial contracts are generally formal, written contacts that contain substantial detail. As such, additional implied terms (other than those implied by law) will only apply if:
In summary, an implied term will generally be one the parties:
Determining whether a term is implied can involve complex legal analysis. It should not be assumed that a term is or will be implied. If something is important to you, this should be expressly stated. A contract lawyer will:
If a contract dispute arises, the Courts may need to interpret the terms of the contract. Contract terms should be interpreted as the parties intended them to be. If the contract is well-drafted, the meaning, or intention, behind each term will be obvious. The Courts will consider how a reasonable person would objectively interpret the term.
Where this fails, as there is ambiguity, there are guidelines to determine the meaning of a term. Generally, these are that the Court will:
This is known as the “parol evidence rule” and applies to contracts that have been reduced to writing. Extrinsic evidence is evidence outside of those written terms. This might include:
The broad purpose of the rule is to exclude such evidence so that it does not:
The Court may consider the circumstances in which the contract was made. However, this will only be done if necessary to assist in its interpretation.
Contract interpretation is subject to a variety of intricate legal principles. Having a well-drafted contract can:
Engaging a skilled lawyer is the easiest way to ensure your contract is suitably drafted.
There are certain exceptions to the parole evidence rule, for example, if:
In the case of the first point, the contract will be partly written and partly verbal. Therefore, the factual circumstances will need to be examined to determine the agreement.
If the second point applies, this promise may give rise to an entirely separate contract.
Our lawyers can guide you if any of these things have occurred leading to a complex contract dispute. We also have experience in what exceptions exist that may allow you to put evidence before the Court. If you have been accused of breaching a contract, we can assist. It may be that other factors are not been taken into account.
Most minor breaches of a contract will not entitle the other party to terminate the contract
Termination may be available, however, where:
“Repudiation” occurs if a party cannot or will not substantially perform the contract. If a contract has been repudiated, the other party is entitled to terminate and claim for damages.
Contracts may also have clauses that state:
Remember, wrongful termination can have significant consequences. You should always speak to a lawyer before terminating a contract.
Some terms are so important to a contract that they are essential terms. If there is a breach of an essential term, the non-breaching party can elect to terminate the contract. This will be the case regardless of the severity of the breach.
The High Court of Australia has set a test for determining whether a contract term is essential. This is outlined in the case of Koompahtoo Local Aboriginal Council v Sanpine. Whether a term is essential is based on the importance of the performance of that term to the parties. Their Honours held that a term was essential if the parties would not have entered the contract:
To understand the importance of a term to the parties, the Courts must learn their common intent. The written terms in the context the contract was entered into will be used to ascertain this.
Where a party breaches an essential term, they will have repudiated the contract.
Outlining that the performance of a term is essential can make it clear when a breach has occurred. This can streamline any dispute process, making it evident:
If a party has breached an essential term, both parties will require legal advice. Our lawyers can assist you to either limit your liability or sue for breach of contract.
The case Koompahtoo Local Aboriginal Council v Sanpine established a stringent legal standard. This standard is used to determine whether a contract term is essential. Due to this high standard, most contract terms will not be characterised as such. This does not mean that the failed performance of other terms will not amount to repudiation. The remedies available for the breach of certain contract terms will depend on:
These terms are “intermediate terms“.
This means the innocent party can terminate the contract following any “serious breach”.
Koompahtoo Local Aboriginal Council v Sanpine also discusses:
The majority held that whether a breach justifies termination is based on its impact. If it deprives the injured party of a large part of the benefit entitled to them, they can elect to terminate.
To determine whether this has occurred, the Courts will look to understand:
If a party’s failure to perform terms under a contract is impacting you, you should seek legal advice. Our lawyers can advise you on your options and whether the contract has been repudiated.
A party may have the right to terminate the contract due to a breach by the other party. This does not mean that they must terminate, and can also opt to affirm the contract and continue. In this case they will have waived their right to termination.
Alternative or additional options available to the non-breaching party may be to:
The non-breaching party can also do nothing following repudiation of the contract. This will have the same outcome as if they affirmed the contract.
Questions can therefore arise if there is a delay in the non-breaching party coming to a decision. These centre around:
Where delays are unavoidable, a party should:
Once a decision of whether or not to terminate has been made, however, this is binding upon the party. They cannot later decide to terminate based on an earlier breach.
Aitken Whyte Lawyers can assist with disputes relating to any commercial contract. We commonly see disputes regarding:
This is not an exclusive list and if you need assistance with a business or commercial contract, we can help.
Engaging an experienced lawyer can:
If you are involved in a contract dispute, our lawyers can make sure your rights are protected.
Aitken Whyte Lawyers Brisbane are focused on results. Our lawyers can assist you with all commercial disputes. Call us today to discuss your needs.
Brisbane
Aitken Whyte Lawyers Brisbane
2/414 Upper Roma Street
Brisbane QLD 4000
