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The Mechanics of Termination

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There are five things to bear in mind when terminating a contract due to the other parties failure to complete: 1.     Set a firm completion date (“Completion Date”). To make it clear that it must be delivered on a certain day, use the term “time is of the essence” in the contract.  2.    Depending on the circumstances, if you do not use the term “time of the essence” and the other party does not compete on the appointed day, or there is no appointed day for completion you may need to serve written notice giving a reasonable period appointing a day by which the other party must sell to or purchase from you (“Notice to Complete”). For instance, in the purchase of a property which is not “time of the essence” if the seller does not sell on the date appointed you serve a Notice to Complete giving say three weeks notice of the Completion Date. 3.    Where you have adhered to the above procedures and the other party is in breach of contract if it fails to complete on the Completion Date (“B

Terminating a Contract- it is not over until it is over

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Terminating a contract, after a party fails to honour its obligations, can be risky. Terminating it when it looks like the party will not be able to honour its future obligations is dangerous. In either circumstance, go to your lawyer and get advice on how to manage the termination process in such a way that the other party is the defaulting party. This means setting up the right amount of evidence of default.  However, much the other party is messing around, the innocent party (you) must be able to demonstrate to a Court that you not only had the disposition to complete but also the capacity. Lawyers call this being “ready, willing and able” to complete.  For example, if you do not have the money to complete the contract you will not get damages from the other party failing to turn up. If a court finds that you wrongfully terminated a contract even the day after signing it and the other party suffers loss, you will be liable. Loss includes costs of assembling the products, getting rid

Courts Will Enforce Contacts

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It may be depressing to be told that if you enter into a deal to do something with someone else, the Courts expect you to honour your part of the bargain. But what if the other party doesn’t deliver on time, has lousy products and makes a pass at your spouse?  Courts can be a little relaxed on how quickly or well contracts are performed provided that they are performed. For instance, if you are a fairly “average” supplier of goods you are probably much relieved. However, the point is that provided the buyer goes through with the contract, however difficult this may be, he can still sue you for being a useless supplier and recover his losses after the event. He can still go to a court during the contract and get you wrapped over the knuckles for being slack and get an order for you to pay the costs.  Generally, Courts will not protect you from yourself and if you enter into a lousy deal however unfair, you are on your own.  The bottom line is that commerce works because “contracts are c

How to Make Contract Terms Stick

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You may be pleased to hear that there is a way that you can make a person entering into a contract with you “jump when you say jump”. It is to have a contract or a certain term that dots every “i” and crosses every “t” in such a way that nothing is left to the imagination. Courts will respect such a rigid framework and not disregard the strict intention of the parties. If you are a tedious, pedantic person, you could try to draft your own “rigid term” contract; however, it may be best left to your lawyer. A good example of this is a standard property contract, which has page after page of small print.  But in every important deal that you enter into, there will be certain parts of the contract that you want to stick. Now, you can let your lawyer guess what these areas are, or you can say what you think they may be. Some lawyers are very good at guessing depending on their experience (especially in retrospect if you or your previous lawyer have messed up the deal), but it is quicker and

Some Contract Terms are More Important That Others

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  The terms of a contract can be divided into two types:  1.    Non-essential terms otherwise called warranties. The court will order damages to compensate you rather than allow you to walk away. Therefore, small breaches by the other party are not much help in getting out of a contract.    2.    Essential terms otherwise called conditions or material terms. For instance, a conditional contract where you need to be satisfied as to finance or due diligence within 14 days. However, essential terms (even where the contract is marked “time of the essence”) are divided into yes you got it - two types:    a.    Where substantial performance is sometimes acceptable e.g. The seller does not have a copy of a stamped lease at the completion of the sale of a property. It is common sense that a buyer should not be permitted to terminate for a minor issue.     b.    Where there must be strict compliance e.g. Handing over the money on time.  In short, all terms are not created equal.  ©  Paul Brenna

Deals - Assume That You Have a Duty of Good Faith

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We all try to do the right thing and act honorably even if it includes some sacrifice on our part.  For instance, if you make a bargain you stick to it.  However, in business it normally depends on exactly how much sacrifice.  Usually, if it is going to cost under say two thousand dollars most people, not all, will reluctantly grin and bear it.  Over that amount clients want their lawyer to find a loophole in a contract. Contracts are usually signed and then put in a drawer.  In the event of a dispute the contract is retrieved and poured over, with a view to either enforcing it against an unwilling party or getting out of it, if you happen to be that unwilling party. There are eight things you should know to avoid problems with the deals that you enter into or at least give you an advantage in your approach. Here is the first one -  Assume that you have a duty of good faith There is some argument about whether or not parties entering into a contract owe a duty of good faith to the othe

Matters Of Principle And Your Money

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  There are two types of matters of principle.    The first type starts with you saying to your lawyer, “It is not about the money…” This is often about the money or comes to focus on the money as the legal action progresses.    The second type starts with you saying to your lawyer something like, “I know this is not a sensible course of action but…”  This usually involves personal insult, family honour, accusations that you are a lousy driver or not good in bed or variations on conflicts which result in hurt feelings and a desire for revenge.     Although there are lawyers who are prepared to litigate on your behalf at no charge, the “payment up front” business model remains the preferred method for lawyers in matters of principle.    Some clients are driven to legal action by their spouses, families or what other people think.  You will find your lawyer focusing on the total cost of the proceedings rather than discussing payment plans or other forms of finance to ease the financial b