Termination of the contract
Ration The contractual remedy of termination is based upon this ratio: if
the other party does not perform, this allows the creditor to bring
the contract to an end
Effect of termination
Each of the parties is no longer bound to perform and is usually
able to claim back what has already been rendered (given)
The ration of termination: (the equilibrium between the mutual
performances would be destroyed if the creditor were not able to
escape from the contract in the event that the debtor mal-
performs) entails that there is no need for attributability of the
non-performance to the debtor or loss to the creditor in order to
bring a claim
Even if the debtor cannot help its non-performance, an action for
termination can be brought
Balancing the interests of creditor and debtor
It is the rightful interest of the
defaulting debtor that not every
minor non-compliance with the
terms of the contract justifies
termination
it is legitimate interest of the creditor to
be able to terminate the contract asap if
the debtor is unable or unwilling to
perform or has gone bankrupt (the
creditor should be allowed to free himself
and contract with someone else)
Example
If shop A orders 100 handmade bags from manufacturer B, and B
delivers 98 bags on time but announces that the remaining two are
likely to come next week, this would be a legitimate reason for A to
claim damages for delay (in case he suffers any), but it normally not
allow him to terminate entire contract
Otherwise, B would suffer a great detriment by losing all incurred
expenses, as he is not able to sell the bespoke bags to somebody
else (criterion to decide under which circumstances the non-
performance is allowed)
A. When is termination allowed?
English law, Adopts a clear substantive criterion and only allow termination in
CISG, PECL case of a breach that is serious enough
PECL
, Approach: clear limit on termination by requiring that the non-
performance must be ‘fundamental’
Fundamental non-performance (makes termination only possible in case of
a serious breach)
Art. 8:103 sets out three situations
In a commercial sale the time of delivery of goods is presumed to
be of the essence (subpara. a)
If a contractor is to build and pave a road to a new buiding before 1
May and on that date the road is not yet paved, makes it unsuitable
to drive upon, the breach deprives the creditor of what it was
entitled to expect (subpara. b)
If a freelancer hands in invoices for expenses he did not incur, this
allows his client to terminate the freelance agreement: this is an
intentional breach and the client can no longer be reasonably
expected to rely on the freelancer’s proper future performance
(subpara. c)
English law
Rescission for breach or repudiatory breach (termination)
Only in case of breach of a ‘condition’ termination is allowed
Condition
Not all contractual terms are of equal importance
Example
If you rent a house for the holiday, the contractual term that you
are allowed to make use of it during three weeks in July is more
important than the term that use of the club includes free access to
the local health club
Ration The contractual remedy of termination is based upon this ratio: if
the other party does not perform, this allows the creditor to bring
the contract to an end
Effect of termination
Each of the parties is no longer bound to perform and is usually
able to claim back what has already been rendered (given)
The ration of termination: (the equilibrium between the mutual
performances would be destroyed if the creditor were not able to
escape from the contract in the event that the debtor mal-
performs) entails that there is no need for attributability of the
non-performance to the debtor or loss to the creditor in order to
bring a claim
Even if the debtor cannot help its non-performance, an action for
termination can be brought
Balancing the interests of creditor and debtor
It is the rightful interest of the
defaulting debtor that not every
minor non-compliance with the
terms of the contract justifies
termination
it is legitimate interest of the creditor to
be able to terminate the contract asap if
the debtor is unable or unwilling to
perform or has gone bankrupt (the
creditor should be allowed to free himself
and contract with someone else)
Example
If shop A orders 100 handmade bags from manufacturer B, and B
delivers 98 bags on time but announces that the remaining two are
likely to come next week, this would be a legitimate reason for A to
claim damages for delay (in case he suffers any), but it normally not
allow him to terminate entire contract
Otherwise, B would suffer a great detriment by losing all incurred
expenses, as he is not able to sell the bespoke bags to somebody
else (criterion to decide under which circumstances the non-
performance is allowed)
A. When is termination allowed?
English law, Adopts a clear substantive criterion and only allow termination in
CISG, PECL case of a breach that is serious enough
PECL
, Approach: clear limit on termination by requiring that the non-
performance must be ‘fundamental’
Fundamental non-performance (makes termination only possible in case of
a serious breach)
Art. 8:103 sets out three situations
In a commercial sale the time of delivery of goods is presumed to
be of the essence (subpara. a)
If a contractor is to build and pave a road to a new buiding before 1
May and on that date the road is not yet paved, makes it unsuitable
to drive upon, the breach deprives the creditor of what it was
entitled to expect (subpara. b)
If a freelancer hands in invoices for expenses he did not incur, this
allows his client to terminate the freelance agreement: this is an
intentional breach and the client can no longer be reasonably
expected to rely on the freelancer’s proper future performance
(subpara. c)
English law
Rescission for breach or repudiatory breach (termination)
Only in case of breach of a ‘condition’ termination is allowed
Condition
Not all contractual terms are of equal importance
Example
If you rent a house for the holiday, the contractual term that you
are allowed to make use of it during three weeks in July is more
important than the term that use of the club includes free access to
the local health club
