Termination of contract
Contract Law

Termination of a contract takes pace when the parties to the contract are released from their contractual obligations. Contract termination may take in a number of way which are:

1. by breach of contract.
2. by agreement between the parties
3. by performance of the party's contractual obligations
4. by frustration.

1. Breach of Contract leading to Termination

A breach of contract takes place when a party fails to deliver on their contractual promises by failing to perform their obligations completely. A party may do so by:

1. in the event that the party has not performed, by stating that they do not intend to perform
2. not performing their obligations or
3. where the performance is defective (for instance, poor workmanship)

An anticipatory breach of contract takes place where a party evidences an intention (either expressly or impliedly) that they no longer consider themselves bound by the contract. In such a party the innocent party may elect to affirm the contract and sue for damages for the breach, or accept the repudiation of the contract and terminate the contract.

2. By Agreement

Contracts may be terminated by agreement where the contract itself provides for the event (for instance upon 3 months' notice); by the parties conduct; or where the parties enter into a separate agreement to terminate the earlier agreement (for example, a compromise agreement where there has been a dispute in respect to the earlier agreement).

3. Termination by Performance

A contract may also be terminated by performance of the parties' obligations. Discharge of a contract in this way takes place when performance of the contract is complete and exact, with reference to the terms of the contract. However, discharge may also place where the contract is divisible; is capable of being fulfilled by substantial performance; the other party has prevented performance; or where partial performance has been accepted by the other party.

4. By Frustration

Frustration is a basis upon which parties may be excused from their obligations to perform as a result of events arising after the contract has been entered. Frustration may be the result of the destruction of the subject matter of the contract; government interference, where performance becomes illegal; a particular event which is the sole reason for the contract fails to take place; the commercial purpose of the contract is defeated; or where a party dies.

When a contract is terminated by frustration, money paid pursuant to the agreement is recoverable, and expenses may be offset against moneys paid.