All businessmen conclude contracts, whether in terms of a formal
written contract or a "gentleman's handshake".
Businessmen often also wish to cancel contracts when the other
party acts in breach of its contractual obligations.
Where a written contract exists, one should first consider the
termination clause. This clause will indicate whether or not the
contract can be terminated within a specific time period, such as
on one month's notice.
If the termination clause specifies that the contract must be
terminated on written notice, ensure that written correspondence is
sent to the defaulting party notifying it of the intention to
terminate the contract after the specified time period.
Where the contract is verbal, it can be terminated on reasonable
notice to the defaulting party. The length of time that constitutes
"reasonable notice" depends on the circumstances. A fixed
term contract, that is a contract concluded for a specified time
period such as one year, cannot be terminated on notice.
Where a party breaches a contract, the contract can be
cancelled. However, the terms regarding cancellation of a contract
must be adhered to strictly.
These terms usually envisage the aggrieved party informing the
defaulting party in writing of the breach and demanding that the
defaulting party remedy the breach within a specified time
If the defaulting party fails to remedy the breach within that
time period, the contract can be cancelled. The contract can also
be cancelled with immediate effect if the breach is so serious that
it goes to the heart of the contract.
In either event, the aggrieved party must give clear notice of
cancellation to the defaulting party. It is advisable that this
notice be given in writing. The right to cancel must be exercised
within the period stipulated in the contract or within a reasonable
time period, if no period is stipulated.
Once the aggrieved party has cancelled the contract, the
cancellation cannot be reversed. The aggrieved party can claim
damages against the defaulting party for any loss it has suffered
as a result of the breach of the contract.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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