Written by: Eloise Turnbull
If you’ve entered into an agreement with a party who breached the contract, you may be torn between enforcing the terms and letting them go.
While the reasons behind the cancellation might be understandable, the short notice and lack of consultation can leave you financially vulnerable. Whether you’re dealing with a client, vendor, buyer, or seller, you may wonder whether it’s worth upholding the contract or if it’s better to part ways amicably.
Assuming the contract is enforceable and legally binding, you may well have rights to enforce it against the other party and address their breach of contract.
What is a Breach of Contract?
A “breach of contract” is where a party does not perform their obligations under the contract. For example, they were meant to pay for services by a particular date and they did not make payment in time, or at all. If loss has been suffered as a result of the breach, there may be options to terminate and/or sue for that loss.
Example of a Breached Contract
In the sale of residential land or property, a settlement date is typically agreed upon between the seller and buyer.
If, on the settlement date, the buyer does not settle — for instance, because of a lack of funds — it constitutes a breach of contract.
The seller then has the right to terminate the contract and sue for damages. Damages refer to the losses the seller suffered because of the breach. For example, the financial loss they incur if they have to sell to another buyer at a lower price than the original agreement.
How to Respond to a Contract Breach
It’s important to address any breach quickly and effectively. Any delay in addressing a breach may be an implied waiver or abandonment, depending on the length of time.
You should seek legal advice as soon as possible from a contract lawyer. They will consider the contact terms, the breach and your options available for addressing it. They can help terminate the contract, seek compensation for any relevant losses and protect your business interests.
How Do I Terminate the Contract?
It depends on the terms of the contract and the reason for terminating.
Ordinarily a contract (written or verbal) will have terms (express and implied) relating to the parties right to terminate the contract.
Valid Reasons for Contract Termination
- If the contract has been breached by the other party and that breach is a “fundamental” or “material” breach, i.e. going to the core of the contract, you may have a right to terminate the contract.
- If the contract has been breached by the other party but it is “minor”, i.e. the overall contract is not affected, there may not be a right to terminate the contract but there may be other rights for compensation such as charge interest for late payments.
If you would like more information on how to respond to a contract breach, chat with one of our commercial litigation solicitors over the phone: (07) 5444 1022
Disclaimer:
The information contained in this article is for general informational purposes only and is not intended to provide legal advice or substitute for the advice of a professional. This information does not consider your personal circumstances and may not reflect the most current legal developments. Should you need advice, please contact our firm for targeted information relating to personal your situation.
Greenhalgh Pickard’s Litigation Team
