Terminating a Contract- it is not over until it is over

Terminating a contract, after a party fails to honour its obligations, can be risky. Terminating it when it looks like the party will not be able to honour its future obligations is dangerous. In either circumstance, go to your lawyer and get advice on how to manage the termination process in such a way that the other party is the defaulting party. This means setting up the right amount of evidence of default. 

However much the other party is messing around, the innocent party (you) must be able to demonstrate to a Court that you not only had the disposition to complete but also the capacity. Lawyers call this being “ready, willing and able” to complete. 

For example, if you do not have the money to complete the contract you will not get damages from the other party for failing to turn up.

If a court finds that you wrongfully terminated a contract even the day after you sign it and the other party suffers loss, you will be liable. Loss includes costs of assembling the products, getting rid of products after your refusal (usually at what you will consider knock down prices) and loss of profit. 

Courts don’t expect you to wait around if the other party does not have the capacity or intention to perform the contract. The difficulty is in proving this. 

For instance, if the supplier does not deliver on time then Courts will expect you to give the supplier more time unless you have made it clear it must be delivered by a certain day by stipulating “time is of the essence”.