Terminating a contract – the importance of getting it right
01 MAY 2020
Terminating a contract, also commonly referred to as ‘discharging’ a contract, is the act of excusing all contracting parties from their contractual duties prior to the expiry of the contract. The contract is effectively brought to an end.
It is important to distinguish termination with the concept of ‘rescission’, which like termination frees the parties from their obligations. However, while rescission seeks to restore the parties to their original position prior to the contract, termination does not.
How a contract may be terminated
A contract cannot be terminated automatically. Rather, a positive action such as giving notice is required. The terminating party can seek to rely on a variety of grounds depending on the circumstances.
For example, contracts typically confer rights of termination which allows termination by one party if certain circumstances have been met. These are contained in termination clauses in contracts and are usually easily identifiable.
Contracts can also be terminated if a repudiatory breach occurs. This is a breach of the contract grave enough to justify termination by the innocent party.
Getting a termination wrong
If a party wishes to terminate a contract it is important they proceed with extreme caution and it is unwise to terminate a contract without seeking legal advice first. Failure to terminate correctly usually invalidates the termination. Common mistakes made by a party seeking to terminate a contract include:
Terminating without the right to do so.
In almost all cases is not black and white as to whether a party has the right to terminate the contract. Parties often invalidly terminate contracts after mistakenly believing they have the right to do so, either by misinterpreting a terminating clause or incorrectly attempting to rely on a repudiatory breach.
Giving the wrong grounds for termination.
Even when parties do genuinely have a right of termination another risk is giving the wrong grounds for termination in the termination notice. For example, in Phones 4U Ltd (v EE Ltd  EWHC 49, EE lost out on a claim of £200m because they relied on incorrect grounds in the termination notice.
Not following the correct termination procedure.
Termination clauses often contain complicated instructions which must be adhered to to the letter. Failure to follow the correct procedure means the termination is unlawful.
In addition to invalidating the termination, failure to terminate correctly also exposes the terminating party themselves to a claim in damages. This is because the terminating party typically ceases to continue their contractual obligations after incorrectly terminating the contract meaning the other party can sue for breach of contract.
If this is the case, the non-terminating party could sue for damages stemming from the loss caused by the breach. As this can include loss of revenue, the cost of rectifying the breach, and any reputational damage, this can be extremely costly for the terminating party.
Additionally, the terminating party could be held liable for damages caused by the termination of the contract. Thus, the terminating party could be forced to compensate the non-terminating party for all the profit it would have made had the contract been fulfilled.
Contract termination is a complex area of law. Careful consideration is required before terminating a contract as invalid termination can lead to serious consequences. Those considering terminating a contract should always seek advice from a legal professional before proceeding.
Here at Barnes Law we can provide you guidance on how to navigate in situations where you need to terminate the contract or feel that you are entitled to terminate it by helping you to understand you rights and obligations under the given contract and, if you are entitled to terminate it, how to do it correctly so it does not expose you to a legal claim.
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Yulia BarnesManaging Partner
Yulia Barnes is our Managing Partner. She is an experienced solicitor and advises on a wide range of contentious and non-contentious matters for both private and corporate clients.Yulia started her legal career at a large international Magic Circle firm. She then became a partner at a regional law firm and headed a Dispute Resolution Department. She then moved in-house before starting her own Boutique practice, Barnes Law, with the aim of providing exclusive services to high net-worth individuals and privately-owned businesses. More details can be found on her LinkedIn profile.
Expertise Yulia and her team are widely recognised for their professional and practical approach to matters. She is committed to ensuring that her clients’ objectives are achieved in the most cost-effective way possible.
Approach Yulia has a wealth of experience working with businesses of all sizes: from large multinational corporations to start-ups. She has particular expertise in a hospitality industry, investment funds, private and corporate clients, and focuses on startups and technology-driven companies. Yulia brings the same level of attention to detail, professionalism and a personal touch to every case and client, and truly immerses herself in her clients’ businesses. She prides herself on her problem-solving, commercially astute approach and her track record of partnering with clients to help them achieve their strategic objectives.
Will joined Barnes Law as an Associate Solicitor in Spring 2023, shortly after qualifying in September 2022.
Will works mostly on real estate and corporate/commercial matters. Will enjoys providing advice on transactional matters.
Away from the office, Will can be found reading or playing golf. While he played rugby until university, and rowed throughout his degree, he now tends to watch both from the sidelines. During the winter he can also be found skiing.
Will plans to continue developing his legal skills and experience at Barnes Law, under the expertise and guidance provided by Yulia.
Mark is an experienced solicitor whose practice areas include intellectual property (IP), IT, data protection and general commercial law.
Mark advises businesses of all sizes – from sole traders to corporations. Among his clients are: clothing and lifestyle brands, restaurants and food suppliers, IT companies, banks, hedge funds and venture capital firms, education providers, medical and pharmaceutical brands.
Outside of his practice, Mark also advises members of the Institute of Directors as part of its Directors’ Advisory Service.
- Prosecuting a UK trademark application on behalf of an education provider and representing them in related UK IPO opposition and revocation proceedings;
- Advising a publisher and a delivery business on data protection matters, B2B and B2C Ts & Cs of sale, website and app Ts & Cs, all aspects of global brand protection;
- Advising footwear brands, alternative asset managers and hedge funds on their global brand protection, including overcoming various refusals, representing them in opposition proceedings and settlement negotiations;
- Representing a central bank in opposition proceedings before the UK IPO;
- Advising a lifestyle brand concerning trademark clearance and protection, negotiations for a website/app development and maintenance agreement.
Ioulia TatawatFamily Law Adviser
Ioulia has a solid background in family law and offers guidance, clarity, and support to clients during one of their most challenging times in their life.
She advises on all three pillars of separation: divorce, children matters and financial settlements. Ioulia is a member of Resolution and is keen to try to settle matters at early stages.
Ioulia is dedicated to assisting clients and navigating them through their legal matters with clarity and support.
Alex joined Barnes Law in September 2023 after finishing his master’s degree in law. Prior to joining Barnes Law, Alex worked in property litigation at Ashfords. Alex assists Yulia on a variety of both contentious and non-contentious matters.
Outside of the office, Alex enjoys reading and hiking. Prior to working in law, Alex was a competitive tennis player.
Alex continues to develop his skills in legal practice under Yulia’s guidance, he plans to sit the Solicitor’s Qualifying Exams (SQE) in 2024.
Mehves joined Barnes Law in August 2023, right after graduating from Queen Mary, University of London (LLB Senior Status). As part of her qualification journey, Mehves is currently pursuing her Legal Practice Course (‘LPC’) at the University of Law. She also holds a degree in European Union Law from Maastricht University, Netherlands.
Mehves works closely with Yulia on a variety of contentions matters and also writes Barnes Law’s legal blogs, manages social media accounts and is responsible for marketing.
Outside of work and studies, she enjoys running, tennis and yoga.
Mehves is looking forward to developing her legal skills at Barnes Law.
Julia PodgornovaInvestor Relationship Manager
Julia guides clients in making important business decisions based on comprehensive risk assessment and strategy. She supports investors in devising strategies designed to maximise each business’s potential from pre-seed to IPO.
Julia’s particular area of expertise are IT start-ups at different stages. Julia supports business through their fund-raising journey. As an Investor Relations Manager, Julia communicates with investors to facilitate a smooth round and legal part of each transaction.
In her free time Julia enjoys sailing, ballroom dancing, art exhibitions and travel.