22/06/2016

We are all very much entrenched in the choices to be made in the current EU Referendum as to whether the UK should leave the European Union. Within that framework, there is a choice to be made but wanting to exit a commercial contract within our own laws of England and Wales may not be a voluntary process or available option to take.

I have had a number of cases recently dealing with the right, or not, as the case may be to terminate a commercial agreement and be released from the binding terms that can otherwise place onerous obligations on a party – not really that dissimilar to Brexit arguments.

Commercial contracts, or for that matter any contract, is made up of express terms which are particular to each individual contract and implied terms which are general and can in some circumstances give business efficacy to the agreement. It is these express terms in relation to termination of a party’s obligations under a contract that have caused my clients heartache in recent times.

Such provisions are usually contained in the small print of terms and conditions stated to be “printed overleaf” or to be viewed on a “web site”. These termination provisions can often be one-sided and more onerous to one party than another. Therefore, before signing on the dotted line or responding by email as is our preferred method of communication these days, double check how you can terminate the contract if you need to. Ensure there is a mechanism whereby there is a mutual obligation to terminate within a reasonable time frame, on reasonable notice and on achievable grounds and pay attention to any immediate termination provisions that could be unhelpful to your business and consequential contractual arrangements.

If you do find yourself bound by express terms that make it impossible for you to extricate yourself from a contract, then your only way out will be to seek to rely on the common law remedy of a repudiatory breach by your contracting party. A repudiatory breach must be of a fundamental term of a contract and if your counterpart has breached any fundamental term then you may be in a position to allege that you accept such breach bringing the contract to an end on a lawful basis. Whilst any express contractual terms does not displace the common law right of termination based on the repudiatory breach, you will almost certainly need legal advice to help articulate such breaches.

Therefore, as with the EU Referendum, before entering into a contractual arrangement take your time to properly inform yourself of what is on offer in the small print to ensure that you have satisfied yourself that entering into the agreement is the commercially astute move to make for your business.

If you require any assistance with commercial contracts, contact Karen Elder on 01782 404639 or karen.elder@beswicks.com