There are various ways to terminate a business contract:
By breach of contract
Business contracts often contain clauses which expressly provide for circumstances where the innocent party can have the right to terminate a contract when the other party has committed a breach of its obligations.
If the clauses are clearly drafted, rights and remedies are on the face of it clear. It may be lawful to terminate a contract based on repudiatory breach.
Where a contract does not expressly include termination rights for breach, one should be cautious as failure to comply with a contractual obligation may not necessarily give the right to the innocent party to terminate the contract. The innocent party should seek legal advice on his position.
By consent between the parties
A contract may be terminated when the parties have both mutually agreed to put it to an end even though there is no such clause in the contract.
For example, in the case of service supplier contract, if the supplier no longer wants to provide service to the consumer, the supplier and the consumer may negotiate and try to reach consensus to terminate the contract.
But a party may insist on some concessions before agreeing to terminate the contract.
By expiry of the contract
Some contracts are of fixed term. At the end of the agreed contractual period, the contract will automatically terminate. An example is the contract for an art project.
One should note that some fixed term contracts may contain clauses that some of the obligations of the party may still continue for certain period of time after the fixed term of the contract has ended. For example, confidentiality or intellectual property protection clauses in business contracts.
If you are considering terminating a contract, you should seek legal advice to avoid the risks and liabilities of any wrongful termination of contract. For example, one should check whether there are any contractual stipulations requiring formal service of notice of termination of the contract, etc.
For legal advice or services on corporate and commercial matters, please contact CHOW & CHEUNG, Hong Kong Solicitors & Notary Public
Tel: +852 2856 3799 Email: firstname.lastname@example.org
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