In this podcast, South Geldard Lawyer’s Senior Lawyer, Ted Orange, discusses the things you need to know about breaching a contract.
Dan: Every day of the week, people enter into a diverse range of contracts, and as you would expect, there can be numerous reasons why those contracts may fall through. In today’s podcast, I’m with South Geldard lawyer, Ted Orange, and we’re discussing the things that you need to know about breaching a contract. Ted, if another party breaches a contract, does that give me an automatic right to terminate it?
Ted: Not necessarily. Most of the time, really, a breach doesn’t always just give you an automatic right to terminate. It depends entirely what the contract says itself, what legislation can say, depending on the type of contract we’re talking about, and it can also depend on very much what the decisions the court have been. They look into many factors, the type of breach, the type of term, and the circumstances in which the breach occurred. But certainly, no. There’s no, you did this, therefore I get to terminate and walk away, and that is an extremely dangerous approach to take. Sometimes it’s the right approach to take, but you wouldn’t be just going off and firing into the wind without getting some advice first.
Dan: Ted, what if the other party is the one who did the wrong thing at first? Won’t the courts treat me more favourably even if I do terminate?
Ted: Not at all. The reality is a termination is quite a severe and harsh response to any breach. You can’t unterminate a contract, and that’s the issue. The courts have in the past been quite critical of parties who’ve terminated despite the other party breaching first or committing something wrong. Sometimes it’s appropriate and sometimes they have a right. But like previously said, it depends on the breach. You don’t just assume that, oh well, because they haven’t done this when they said they would, that the court is going to do you any favours if you’ve inappropriately terminated a contract when you shouldn’t have.
Data rises, get some advice, there’s other options available. There’s compensation, there’s other remedies available, and you need to look at which one is the best one, because sometimes the contract does need to remain on foot. In fact, keeping on the foot, if that’s the right thing to do, the other party’s breach, well, then you’re complying with the terms, you’ve done everything to meet your end of the deal, I think that’s the way to be treated more favourably than just terminating, assuming that they’re going to be more critical of this other side.
Dan: But what if I just threaten to terminate the contract? What are the ramifications in that case?
Ted: Well, it can get you into trouble, unintentionally. I wouldn’t recommend, particularly in writing, saying, we’re going to terminate the contract, or something along those lines without getting some advice first. If you do feel like you need to say something, you might need to say something along the lines of, We’re going to seek advice. But all written communication and the larger the commercial impacts of what you’re talking about, well, that necessitates greater need for legal advice. I would be very careful, people have gone off and have said these things in the past, not realising that it can come back to bite them.
I think it’s really important that you get advice and if you’re someone sitting there and you’ve got these contracts and it’s something that comes up regularly, will you get advice on the nature of it, and you can certainly get at least some guidance that you might be able to apply regularly, each situation is different. You might be in the business where you work on one large contract, or you might be on the one where you work on lots of little ones that are the same. You can get some guidance about, say, those lots of little ones that may be applicable across the board, or you can get some advice on just that larger, bigger one about how you would communicate, articulate a threat without actually doing it. I think that’s what we’re getting at here.
Dan: Now, if anyone listening to this podcast has got questions, they can reach out to you and the team at South Geldard Lawyers?
Ted: Yeah, of course. That’s what I’ve been rambling on about, I guess. The tricky part is that everything’s so unique, and when you try and put a blue… Paint everything over a broad brush, that’s when people get into trouble. I do understand that it depends entirely on what, like I said before, the commercial impacts. You’ve really got to weigh those up, but even just a phone call, give us a ring. Certainly, we’re able to give you that initial guidance as, hey, I really do need to spend a bit of money in this and get this looked over, or perhaps in the grand scheme with things. Maybe after this conversation, I might be in a position to handle it myself, so always reach out.
Thank you for listening. If you have any questions, please do not hesitate contacting Rockhampton lawyers at South Geldard on 07 4936 9100.