Termination Of A Contract, Part 1

 

By Albert L. Kelley

 

How do you end a contract? It depends on why it is ending. In most cases the contract ends because the parties have finished their mutual obligations. In some cases it ends because time has passed. In some cases it ends because a party has excused the other’s performance. In some cases it ends because there has been a breach of performance.

 

 

The performance of a contract takes numerous forms. Once the agreement is in place, if a party offers to complete his obligations, it is said he made a tender to perform. As an example, if you order 25 chairs from a furniture company and it has a delivery truck show up at your business with the chairs, that is a tender. Generally, if there are no extraneous circumstances, the tender must be accepted.

 

 

When the performance is the payment of money, then the person can tender payment by submitting cash only. A check or a money order is not sufficient. This can be modified by the contract. Also, the tender must be for the full amount. A partial payment is not sufficient tender.

 

 

When a contract requires performance within a specific period of time, the contract ends upon the expiration of that period of time. If there is no time specified, the courts will imply a reasonable time. If a reasonable time has passed and there has been no performance, then the contract is in breach. If the contract states that there must be performance within a specified period, that time period controls. Often time, the contract will state that “Time is of the essence.” This means that the parties have a right to insist upon strict compliance with the time deadlines.

 

 

To be in compliance, the performance must be adequate. This does not mean perfect or exact, but “substantial.” In other words, if a party completes the vast majority of his obligation, so that all that remains are extremely minor issues, the courts may hold that he “substantially” complied with his obligations and thus the contract will be complete. Further, if the terms of the contract state that full compliance is required, then substantial performance will not be a defense.

 

 

Some contracts state that performance must meet the other party’s “satisfaction.” These contracts are not favored as they do not have a great deal of specificity, but they do occur and substantial performance is often not possible, because the outcome is judged by a subjective taste.

 

 

A contract may be discharged by agreement of the parties. If the deal just isn’t working out, the parties may agree to end the relationship.

 

 

Sometimes the contract will allow either party to terminate it upon providing notice to the other party. On continuing contracts with no set expiration term, the contract may be terminated by either party at will, or at his or her discretion. A notice may, however, be required.

 

 

If the contract is for services for a certain period of time, such as employment for a one-year period, the contract is considered complete at the end of that term and notice is not generally required to terminate it.

 

 

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is so the author of “Basics of Business Law” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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