Question

(in business law )When can a party terminate a contract? What are the effects of termination? Are there any limits on the power of a party to terminate a contract?

What are time stipulations? When will a party be able to validly terminate a contract if there is breach of a time stipulation?

Answer 1

Termination of contract and limits on the power of a party to terminate contract

A contract is a legal document that binds at least two parties to one another. A contract requires one or both parties meet obligations detailed in the contract before it is completed. In some instances, contract termination can occur that will make the contract void of legal binding. A contracting party (or parties) can terminate a contract if it does not meet certain legal criteria. Only the parties involved in the agreement may terminate a contract.If you want to look into terminating a contract, the best idea is to consult an attorney first.

When will a party be able to validly terminate a contract

1) Lack of Consideration

In legal terms, "consideration" refers to something of value given by both parties to a contract that induces them to enter into the agreement. Consideration must have an objectively determined value. Thus, a promise of love or affection is not enforceable because its value is subjective. If there has been no consideration, or bargained-for exchange, a court will deem the contract invalid and it can be terminated

2) Lack of Capacity

A court will not observe the contractual obligations of an individual that lacks capacity. Examples include persons who are under 18 or are mentally incompetent. While a court will not recognize the contractual obligations of a minor, contractual obligations made by an adult to a child are enforceable. If a minor does enter into a contract, he or she can affirm the contract once they are of legal age. A person is considered mentally incompetent if he lacks the ability to understand the agreement. If incapacity is temporary, an individual can affirm or disaffirm when she is no longer deemed to be mentally incapacitated.

3. Statute of Frauds

Certain types of contracts must be written to be enforceable. These include pre-nuptial agreements, service contracts not capable of being performed within a year, land contracts, and contracts for goods of $500 dollars or more. Even though such contracts must be written, a court has discretion to determine whether "informal writings," such as invoices or letters, meet the Statute of Frauds requirements.

4.Mutual Mistake

If both parties entering into a contract are mistaken about the facts relating to a contract, the contract might be voidable. This is true if the mistake concerns a central element of the contract, and the mistake has material effects on the contract terms.

5.Misrepresentation

A misrepresentation is a false assertion of fact that induces someone to sign the contract. There is no intent of wrongdoing required for misrepresentations. Thus, even if the misrepresentation is not fraudulent, the contract is voidable if an innocent party relied on the information that turned out to be false.

6.Breach

A breach arises when a party fails to perform any term of a contract absent a legal excuse. A contract cannot be terminated simply because a party breaches the contract. It depends on whether the breach was major or minor. To determine whether a breach was major or minor, the courts will look at several factors: the amount of the benefit received by the non-breaching party; the extent of part, or partial, performance of a contract; and the negligent or willful behavior of the breaching party, among others. If there is a substantial performance of the contract, then the breach is not material. A material breach permits the aggrieved party to terminate performance of the contract.

7.Discharge by Frustration

If there is some supervening act that the parties did not reasonably foresee and the purpose of the contract has been completely or almost completely destroyed, the contracting parties will be discharged of their obligations. These situations typically mean the contract is either impossible to perform or no longer serves its commercial purpose

8.Inability to Perform

Performance of contractual duties can be excused under an impossibility theory. Types of impossibility theories observed by the court include acts of God, death, or legal impossibility. If the performance is only partially impossible, it is only discharged to that extent. Temporary impossibility suspends performance.