Cancelling A Contract With A Contractor

The majority of standard form building contracts contain express termination clauses that provide the Employer and Contractor, or Either Party with the right to terminate the contract in specified circumstances.

A contractual right to terminate is often the preferred method of bringing a contract to an end because sometimes it does not require a breach of contract to be proved at all and, even where it does, the right to terminate can be exercised even if the breach is not of a repudiatory nature required for a common law determination. The contractual provisions also provide certainty as to the procedure to be followed by an innocent party and are often drafted to allow for a period of grace during which the party in default can remedy its breach and may, therefore, avoid disruption to the project or a breakdown of commercial relations. In this article, cancelling a contract with a contractor, we take a look at the process involved.

Free Initial Telephone Discussion

For a free initial discussion on how we can advise you on cancelling a contract with a contractor, get in touch with us today. We will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help you avoid making mistakes, saving you money and also avoiding the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or complete our online enquiry form and a member of the team will get back to you.

Notice Requirements

Terminating a contract often requires a notice or notices to be served and it is vital to abide by the notice requirements of the contract. The form, content, timing and mode of service of the notices is normally set out in the contract and, as far as possible, should be followed to the letter.

With regards to the content of the notice, it is advisable to refer specifically to the clauses of the contract as well as their content when drafting notices as a reasonable recipient of the notice must be left in no doubt as to its meaning

Time limits will be interpreted strictly and are likely to be a condition of valid termination. Therefore, it is important to consider whether time is calculated on the basis of business days and/or clear days, how the contract deals with public holidays, and how the “deeming” provisions for dates of service operate under the contract.

Employers’ rights to cancel

The common express clauses giving the employer the right to terminate are:

• suspension without cause/abandonment of the works;
• failure to proceed regularly and diligently/with due diligence
• refusal to comply with an instruction requiring to remove works/goods not in accordance with the contract/failure to remedy defects;
• sub-contracting or assigning without consent;
• failing to comply with the CDM requirements; and
• failure to provide the security required by contract, e.g. performance bond.

Contractors’ rights to cancel

Examples of the types of circumstances which may be expressly provided in the contract as giving the Contractor a contractual right to terminate are:

• non-payment;
• interference with or obstruction of the issue of any certificate;
• an assignment of the construction contract by the Employer without consent;
• a failure by the Employer to comply with CDM regulation requirements; and
• if the works are suspended for a continuous specified length of time caused by Architect’s/CA’s instructions or any act of prevention by Employer.

Termination by Either Party

The standard form contracts also contain clauses which deal with events that give either party the right to terminate. For example:

• “At will” clauses
• force majeure
• loss or damage to the works caused by specified perils unless they were caused by the Contractor
• civil commotion/terrorism
• act of Government directly affecting the execution of the works; and
• insolvency (of the other contracting party)

Common Law Right to Terminate

If there are no express termination provisions in a contract, the only other option is to look to the common law and determine whether or not there has been a repudiatory breach of contract. If this is established, it would entitle you to elect to put an end to all remaining primary obligations of both parties under the contract.

Whether to terminate under the contract or at common law is dependent upon a number of factors:

• The type of breach that has occurred.
• A consideration of the level of damages that may be awarded.
• Whether the common law right is expressly (or impliedly) excluded by the terms of the contract.

What is a Repudiatory Breach?

A repudiatory breach occurs when a party commits a breach of contract that is sufficiently serious that it entitles the innocent party to treat the contract as terminated with immediate effect and to sue for damages for breach of contract.

In the construction industry, the following constitutes a repudiatory breach of contract justifying termination at common law:

1. a breach of condition (as opposed to warranty).
2. a refusal to perform.
3. a sufficiently serious breach of an intermediate/innominate term.

How we can help

We have a proven track-record of helping clients deal with cancelling a contractor with a contractor. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner and support and advise you with all the negotiations. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact our Construction Solicitors

It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.

To speak to our Construction solicitors today, simply call us on 0345 901 0445 , or allow a member of the team to get back to you by filling in our online contact form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Construction, News Tagged as