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Assuming that I am a party to a legally binding contract with another party how does it come to an end?

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A contract can come to an end by:

  • Termination or Discharge

    Termination ends the contract at a point in time and prevents further obligations on the parties but their rights and obligations up to the time of termination remain intact.

    • Performance: Each party has fulfilled its obligations under the contract precisely - close enough is not good enough. For example, if the contract required you to deliver tinned fruit in boxes of 30 you have not performed your obligations if you delivered the correct number in boxes of 24 (In re Moore & Co and Landauer & Co [1921] 2 KB 519). Performance must take place in the time specified or within a reasonable time if no time is specified. Note that if the contract includes goods and services guarantees then the contract does not end until these expire.

      There are exceptions to the rule of precise performance:

      • where a contract is divisible - that is payment is due from time to time for performance of specified parts,
      • where partial performance has been accepted,
      • where performance is prevented by the other party,
      • where there has been substantial performance, for example, in a construction contract where the building is usable but contains minor defects.
    • Agreement by:

      • Substituted agreement which will need consideration on both sides, which can be each party releasing the other from any unfulfilled obligations.
      • Accord and satisfaction by one party purchasing release by entering a new agreement ("accord") for valuable consideration ("satisfaction").
      • Failure of a condition precedent or subsequent a contract may provide for its own discharge when a something that is required to happen before ("precedent") or after ("subsequent") the formation of the contract does not occur. For example, a contract to buy a car if it passes a mechanical test is a condition precedent while a contract entered on behalf of a corporation not yet incorporated fails a condition subsequent if the corporation does not get incorporated.
      • Election to terminate a contract may have a clause allowing a party to terminate it with or without conditions.
      • Abandonment if both parties 'walk away' the contract is abandoned.
      • Waiver one party may waive performance of the contract by the other party.
    • Breach by one party allows the innocent party to:

      • repudiate the contract and sue for damages for breach of a condition of the contract
      • repudiate the contract and sue for damages for breach of an intermediate term of the contract if the breach is serious enough
      • sue for damages for breach of an intermediate term of the contract if the breach is minor
      • sue for damages for breach of a warranty of the contract

      A condition is a term of the contract that is so fundamental that a breach of it justifies termination. A warranty is a term that is ancillary and doesn't justify termination if it is breached. An intermediate-term is a condition or a warranty depending on the egregiousness of the breach. It can be difficult to determine if any given term is a condition or a warranty so anyone trying to terminate a contract for breach really needs professional legal advice because if they are not entitled to do so they will have breached the contract themselves - and in a big way.

      A breach may come about in several ways including clear failure to perform, express repudiation by one party communicating an intention not to perform, or the action of one party rendering performance impossible. A breach may involve actual breach (actually failing to perform) or anticipatory breach (threatened breach through unwillingness or inability).

    • Lapse of time due to the operation of statutes of limitations. Strictly speaking, the contract becomes unenforceable rather than discharged because it becomes impossible to take legal action under it.

    • By operation of law for including:

      • Merger where a deed or judgment of a court swallows up the contract,
      • Material alteration of a written document by one party allows the other to terminate the contract
      • Death generally an estate is still bound by the deceased's contracts but not where the contract is one for personal services, for example, contracts with actors, chefs, babysitters, etc.
      • Insolvency personal bankruptcy or corporate liquidation can terminate a contract.
    • Frustration where a supervening event over which neither party has control and that the contract doesn't have a provision for ends the contract. Examples include that the operation of the contract becomes illegal, destruction of the subject matter of the contract, the circumstances of the contract cease to exist, the non-occurrence of a required event, a personal services contract being interrupted due to the incapacity of the person, government action.

      The status-quo at the time of the frustration is maintained unless there has been a total failure of consideration. For example, if I am required to provide services for 1 month for which I have been paid in advance, I get to keep the money if I have performed any of the services but if I was to be paid on completion I wouldn't be entitled to any money even if I had provided the services for 27 days. Because the consequences of a common law frustration can be manifestly unjust, many jurisdictions have statutes that deal with frustrated contracts.

  • Rescission

    Rescission is sometimes loosely used as a synonym for repudiation (see above) but technically, it refers to a situation where the courts will restore the parties to the positions they occupied before the contract came into existence. Rescission will not be granted where it would affect the rights of third-parties It may be granted because of:

    • Mistake which is restricted, narrow and technical and does not extend to an error of judgment as to the value of the consideration they or the other party supply. Suffice it to say, you cannot escape a contract where you have underestimated the amount of work required or bought something a too high a price or sold something at too low a price.
    • Misrepresentation by one party which induces the other to enter the contract.
    • Undue influence where one party misuses a position of power over the other to cause them to enter the contract
    • Duress which forces a person to enter a contract against their will. The Godfather's "I gonna make him an offer he can't refuse" being the classic form.
    • Unconscionably where a contract put forward by a party in a superior bargaining position is so one-sided that no reasonable person would agree to it.
  • The order of a court

    A contract may be terminated by a court order such as one that might arise under consumer protection or unfair contract statutes.

  • Again, this is not correct. Breaching the contract does not have to end in suing. – Putvi Apr 11 at 15:53
  • Also, without more, the part that says the obligations must be performed precisely but is then followed a few lines later with an exception allowing for substantial performance is confusing at best to most readers. It’s not necessarily inaccurate, but rather lacking appropriate context. – A.fm. Apr 11 at 16:13

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