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 period.
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.