Question

1-   Discuss termination provisions in contracts

·        If you had to terminate a contract, how would you do that?

·        Give an experience you or others have had terminating a contract and/or Research the problems in connection with terminating a contract

2- Comment on uncertainties in contracts. Describe the points you need to be aware of in regards to uncertainties.

3- Using the Internet or any other resource discuss these terms and how they affect court decisions:

business efficacy

officious bystander

Answer 1

1. Terminating a contract simply means legally ending the contract before both parties have fulfilled their obligations under the terms of the contract. There are many reasons why a party can terminate a contract. When and how the contract is terminated determines whether either party has any liability for breach of the contract before it was terminated.

There are 5 ways to terminate a contract

- A contract requires one or more parties to do something, which is called performance. If for some reason it is impossible for the party to fulfill its duties, it is called impossibility of performance. The company can terminate the contract in this scenario.

- When a contract is intentionally not honored by any one party, it is called a breach of contract and is grounds for contract termination.

- One can terminate a contract if he and the other party have a prior written agreement that calls for a contract termination because of a specific reason.

- A contract is also terminated because an individual misrepresented himself, acted illegally, fraud, for example or made a mistake.

- A contract is essentially terminated once the obligations outlined in the contract are duly completed.

In my own experience, an unexpected event caused delays in delivery of goods contracted to be supplied on a timetable, i.e electronic components

Delays thus caused by that unexpected event affected the contracting parties’ ability to perform contract. The party was hence no longer able to deliver on the contract which in turn gave rise to rights to terminate the contract altogether.

2. One needs to be aware of the below factors in regards to uncertainty in contracts.

- Contract drafters should carefully consider if each clause of the contract contains enough detail to operate as intended. In cases of uncertainty, parties may find the court interpreting the provisions for them, which could have unintended consequences.

- All concerned parties should beaware allowing uncertain terms to be incorporated into contracts on the basis that they will have no effect. In those circumstances parties may find themselves bound by terms they would not have wished to include in the contract.

- In the context of a possible dispute, parties should consider carefully before running an argument that a term is void for uncertainty. Such arguments will rarely succeed and where they do not, the court will impose its interpretation on the concerned parties.

3. The principle of business efficacy is normally invoked to read a term in an agreement or contract so as to achieve the desired result or the consequence intended by the parties acting as prudent businessmen. Business efficacy is the power to produce intended results. The test of business efficacy requires that a term can only be implied if it is necessary to give business efficacy to the contract to avoid such a failure of consideration that the all parties in the contract can as reasonable businessmen have intended. But here only the most limited term should then be implied or the bare minimum to achieve the goal. If the contract makes business sense without the term, the courts will then not imply the same.

Officious bystander is a test that is used to determine if an unstated condition was originally implied at the time of writing a contract. In this method, an investigator tries to determine if the contracting parties had intended to included the term in the contract. As such, an unimplied term can be one that is logical and reasonable under the present condition, but one that was not accounted for at the time the contract was drafted. In a recent decision, Court restated the traditional test for the implication of terms in contracts and also clarified that a term will be implied only if the contract would be commercially unworkable or absurd without it.