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Right to terminate the contract

Sometimes a contract will specifically say that one party may end the contract if there is a particular kind of breach (or perhaps any breach) by the other. Any clear provision to this effect will be decisive.

If there is no express provision, the general rule is that a very serious breach by one party will allow the other party to choose whether or not to end the contract.

To be serious, the breach would have to be either:

  • a breach of any term that has very serious consequences - that is, the effect of the breach must substantially deprive the innocent party of what was intended to be obtained under the contract
  • breach of a vital term - that is, a term in relation to which, at the time the contract was signed, the party's words and conduct showed that the party considered that strict compliance with the term was essential.

If the other party's breach is very serious, you can end the contract, but you do not have to. You can choose to go on with the contract, and still keep your right to claim damages (compensation). If you decide to end the contract, you should tell the other party immediately.

Making a Contract  :  Last Revised: Tue Oct 9th 2018
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