UK: Escaping A Bad Contract - Breaking Up Is Hard To Do

Last Updated: 6 November 2007
Article by Jonathan Riley

So, the honeymoon’s over. The cracks have started to show. You’ve been arguing for months and performance has been, frankly, dismal. Let’s face it; you got into bed with the wrong partner and now you want out. For any company that has received less than it bargained for from one of its contractors, this may sound all too familiar. So what happens when you’ve reached the end of the road? This article considers how to put a broken contractual relationship out of its misery.

So you think you’ve had enough? Before you reach for that contract however, consider carefully the full commercial implications of severing the relationship. If, for example, continuity of service is key to your business and there is no ready option to bring on board an alternative supplier, it is likely that you need to find a way to bring performance back on track. Renegotiation, rather than termination, may be the better option.

If you really do want out however, then it is important to have a full understanding of the options available to you and the legal implications of each. Get it wrong, terminate without having established clear grounds to do so, and it will be you who is in breach and could even find yourself on the receiving end of a damages claim.

Most contracts contain express termination provisions setting out the grounds on which either party may terminate. Common examples include:

A clause allowing termination for any breach. Generally a term that allows termination for a single breach of any obligation, however minor, will not be enforceable (particularly in long-term contracts and/or where a party has invested substantially) if to do so would flout common business sense; in other words, if the breach is so trivial as to have no material impact and the party seeking to rely on it is effectively using it to escape the contract ‘by the back door’. In some circumstances relevant to supply contracts however, a party may be able to terminate for any failure, however minor, to deliver on time if the contract states clearly that for all deliveries "time is of the essence". Consider at the drafting stage which obligations should allow for no flexibility in timing, then word the contract accordingly.

A clause allowing termination for a "material" breach. Commercial contracts commonly contain a provision entitling a party to terminate when the other has materially breached its obligations. Usually the party in breach will then have a limited period of time to remedy the situation (assuming that this is possible) after which, if the breach remains unresolved, the contract will terminate with immediate effect. Check your contract; "material breach" may be expressly defined as the breach of a particular clause and if clear and unambiguous, this may even spare you a trip to court. Typically, however, "material breach" will be left undefined to allow flexibility and will need to be understood in the light of all the circumstances. Consider, therefore, what the other party is expected to deliver under the contract. Are they doing it at all or are they substantially failing to meet their end of the bargain? How serious is the impact on you? Finally, can you find evidence to substantiate your view?

A clause allowing termination on notice. Sometimes the parties will have negotiated a right to terminate the contract at will, for reasons of convenience, simply by serving notice on the other. Before giving any notice first check that there are no associated pitfalls contained in the contract – an early termination payment for example. Take care to observe the stated notice period and to send the notice to the right address and person and in the required form (there is usually a separate ‘service of notice’ provision included in the contract). Failure to comply with such requirements could render your notice invalid. Terminating on notice gives certainty because there is no need to prove a "material breach", a concept which is likely to be fiercely contested by the alleged breaching party. In addition, terminating on notice, rather than attempting to rely on the less certain outcome of a termination for breach, does not in itself preclude you (as the innocent party) making a claim for damages. However, it may be wise, tactically-speaking, to make any such damages claim before, or at the same time as, giving notice, so as not to jeopardise your chances of succeeding in that claim later.

A clause allowing termination because of certain specified events. Common provisions relating to the other party may include a change of control, insolvency and failure to continue a business relevant to the contract. Given the difficulties frequently involved in establishing a breach, even where the other side has failed to perform its obligations in this respect, it may not be easy to establish a breach. Nonetheless, and in the absence of a clear right to terminate for convenience, you may want to consider whether any of these specified events has occurred; they could be your most assured method of bringing the contract to an end.

Other escape routes

The contract’s termination clause may not be your only weapon when trying to see off a troublesome contractual partner.


Even where no express provisions exist, if the breach committed is so fundamental that it runs to the very heart of the contract, then the party in breach will be deemed to have committed a "repudiatory" breach. Here the general rule is that the breach must have deprived you of the very benefit that the contract was intended to deliver. If a repudiatory breach is established you are entitled to treat yourself as having been discharged from your obligations and from accepting further performance under the contract. You will still need to communicate clearly to the other party your decision to bring the contract to an end, and this should be done as soon as possible since failure to act promptly may result in you seeming to "accept" the breach and so forfeiting your right to terminate. If the contract allows termination for material breach then it should not be necessary to rely on repudiation, but this fall-back may be needed in a contract which lacks proper termination for breach provisions.


If you can show that you were induced to enter into the contract by a misleading statement (oral or written), you may have a claim for misrepresentation, in which case you could be entitled to ‘rescind’ (ie, terminate). For example: a software provider bidding to sell you a software system seals your purchase by telling you that the system performs a function that would meet your particular business needs. If this assertion later turns out to be false, you may have the right to set the contract aside (in other words, to treat yourself as never having entered into the contract in the first place). In practical terms, this may entitle you may also be able to recover any sums paid to the provider on condition of returning the system. Whether or not this remedy is available to you will depend on the way in which the misleading statement was made. Was it:

fraudulentie, did the contractor know that the statement was false, did not believe it to be true, or was he reckless in that he did not care whether it was true or false?;

negligent – was the contractor careless in making the statement or had he no reasonable grounds to believe it was true?; or,

innocent – did he simply get it wrong but had reasonable grounds to believe the statement to be true?

If the representation was made fraudulently or negligently you may be entitled to ‘rescind’ the contract as well as to claim damages for any loss sustained as a result of having relied on the misrepresentation. If, however, the false statement was made innocently then the court can decide whether to set aside the contract or to award damages, but it cannot do both.

Check your contract for express 'non-reliance' clauses in respect of pre-contractual misrepresentations. These are included in many commercial contracts and they could defeat any potential misrepresentation claim. The purpose of such a clause is specifically to exclude any liability for all but the worst (ie, fraudulent) types of misrepresentation it is illegal to exclude liability for fraudulent misrepresentations.

But, be warned; any right to have the contract set aside may still be lost if:

  • you decide to carry on with the contract in spite of the misrepresentation;
  • it is no longer possible to treat the contract as never having existed and to restore the parties to their original position;
  • a third party has acquired rights under the contract; or,
  • too much time has passed.


Finally – though this one is rare in mainstream commercial dealings – you may be entitled to walk away from the contract on the basis that the parties were mistaken as to some important fact at the time it was entered into. For example, a mistake may have been made about the very subject matter of the contract itself. Such a 'mistake', if substantiated, attacks the validity of the contract and may entitle you to have the contract held void.

In the next update we will look in detail at rights to seek damages and other remedies where a contract is no longer working for you.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.