When entering into a contract, it is expected that all parties will uphold the obligations and requirements of the contract. However, in some cases, a party may refuse to perform their obligations as a form of repudiation of a contract, leaving the other party in a difficult position. A party not performing their obligations can result in a contract dispute and other consequences.
Keep reading this LegalKitz blog post if you would like to learn more about the repudiation of contracts. If you believe that your contract has been repudiated, it is important to seek legal advice to ensure that your position is protected from the other party. Click here to book in with one of our business specialists!
What is repudiation?
Repudiation in this case refers to conduct that evidences a person’s unwillingness or inability to perform the conditions of the contract. Repudiation can also occur when a party does not consistently fulfil the contract obligations, or is not upholding the requirements outlined in the original contract.
When does repudiation occur?
Repudiation of a contract occurs when a party refuses to fulfil their obligations within the contract. Repudiation is often an anticipatory breach. This is where repudiation occurs before a breach of the contract occurs, which is different from other disputed contracts in which a breach has already occurred.
Although a breach may not have occurred, repudiation of a contract is a serious matter. To claim a contract has been repudiated, there must be a clear indication by one party of a refusal to perform the requirements of the contract.
How to respond to a repudiation of the contract?
When a contract has been repudiated, it does not necessarily mean that the contract has been breached or terminated. Repudiating allows the innocent party to choose what will happen with the performance of the contract. The ‘innocent party’ here, is the contracting party that is able and willing to perform the contract.
Here are some options you may choose from:
- You may accept the repudiation and terminate the contract with the other party; or
- Choose to continue with the current contract
If you are a victim, it is recommended that you write a declaration of your choice, whether you terminate the contract or continue with the performance of the contract. If you do not write an express declaration, the court on their own account may infer that your actions or words amount to either accepting the repudiation or choosing to continue the contract.
If you choose to terminate the contract, the parties of the contract do not need to fulfil their contractual obligations. The innocent party here then may seek to see if they have a cause of action to obtain damages from the other party. On the contrary, if you choose to continue the contract either through actions, by writing, or by the court, the contractual obligations of the contract will continue. However, the innocent party will lose their right to obtain damages for the repudiation. If the innocent party is subject to repudiation later, then they are entitled to seek damages if choosing to terminate the contract.
Legal Advice
The performance of a contract is a legally binding agreement. In the circumstance, you are placed in a situation where you or another party refuses to perform their requirements, it is important to seek legal advice about your choices if you are an innocent party, and the implications of not adequately responding to the repudiation. Here at LegalKitz, we offer a FREE 30-minute initial consultation with one of our experienced business specialists. You can also get in contact at [email protected] or at 1300 988 954.
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Our sister company, Business Kitz, has a huge bank of solicitor-drafted contract templates to help you avoid contract repudiation.