Termination of construction contracts

A contract that includes a termination clause may make detailed provision regarding when and how termination may take place, and the consequences that follow. Strict adherence to the detail of the clause is important in order to avoid terminating unlawfully and thereby being in breach of contract. This section examines such a clause in the JCT 2016 Standard Form of Building Contract.

Where one party is in breach of contract, it may be open to the other party to elect to accept that breach and thereby bring the contract to an end. To say that the contract is 'terminated' is not strictly correct because while the parties are discharged from any further obligations, they remain bound by those obligations that accrued before the breach.

This is an area that frequently causes difficulty and parties should be cautious, since only a breach that is 'repudiatory' will entitle the innocent party to terminate the contract. If the breach in question is not repudiatory, the other party may not rely on it to discharge themselves from their obligations and is limited to a remedy in damages. If a party mistakenly relies on a breach that is not repudiatory in nature it is likely that the party will itself be in repudiatory breach (Vivergo Fuels Ltd v Redhall Engineering Solutions Ltd [2013] EWHC 4030 (TCC)).