Termination

Acknowledgement
The images/ video clips in the presentation are
drawn from different internet sites for the purposes
of classroom instruction.

The references to the sources are at the end of the

presentation.
Contracts were basic.
Give with one hand
and take with another.
 If not,
the contract ended.
The party in breach
paid damages.
 Now

transactions are elaborate.

 Contracts

A sequence of duties.
 Illustration

Home moving contract

Duties of transporter
Adequate Packing
Consolidation
Loading
Giving a receipt for the goods (Consignment note)
Warehousing
Transportation
Delivery
Delivering
Duties of customer
Advance payment
Giving access to premises
The contract is performed with the transporter
giving a receipt.
The contracting parties
have multiple duties.
 Recall:
The party in breach paid damages.
 The principle got extended to
the contracts with multiple duties.
 For every breach of
a term of a contract,

the suffering party has

a right to claim damages.
 Recall: On breach,
the contract terminated.
 The courts
extended the principle
to the contracts
with multiple duties.
Subsidiary

Core
 Subsidiary

The contractual duties were clustered

as core and subsidiary.
 Subsidiary

Breach of core,
the contract is lost.

The suffering party can elect

to terminate the contract.
 Subsidiary

On election to terminate

The parties are discharged

from further performance of
the contractual duties.
 Subsidiary

Breach of subsidiary,
the contract survives.

The contract cannot be terminated.

 Summary
Subsidiary

On every breach,
right to claim damages.
 Summary
Subsidiary

Election to termination
only on breach of the core.
 Warranty

Condition

Core is called condition

and
subsidiary warranty.
 The courts decided
whether a term was
a condition or warranty.
 Contract: Hire of a Car
Classify the following clauses as condition or
warranty for a taxi service.

Clause 5: White colour car seat. Warranty

Clause 6: Brake would be in good order. Condition

 Contract: Hotel Guest
Classify the following clauses as condition or
warranty for a contract to stay in a hotel .

Clause 5: Welcome guests with flowers. Warranty

Clause 6: AC in the room to be in good order.

Condition
 Termination clauses
used the terms
condition and warranty.
 Example
Contract: Hotel Guest

Clause 5: Welcome guests with flowers.

Clause 6: AC in the room to be in good order.

Clause 28: All terms of the contract are a condition

to the contract.

The effect of clause 28 is that a guest can

terminate the contract if not welcomed with
flower.
 Example
Contract: Hotel Guest

Clause 5: Welcome guests with flowers.

Clause 6: AC in the room to be in good order.

warranty
Clause 28: All terms of the contract are a condition
to the contract.

The effect of clause 28 is that a guest can

never terminate the contract, even if the AC
is not working.
 ‘Condition’ and ‘warranty’ have
other meanings in English language.
‘Condition’ could mean
conditional
as opposed to the core.
‘Warranty’ could be
an assurance
and not subsidiary.
 Alternate meanings
created
confusion and uncertainties.
 The use of the terms
condition and warranty
is now abandoned.
Termination clauses are
written in simple English.
Example:

Termination: A hotel guest can

terminate the contract for breach of
any term of the contract by the
hotel.
Every contract has
a time line
for performance.
 Is performance on time
core or subsidiary?

1. The photographer turned up after

Core
the engagement ceremony was over.

2. A consumer got the washing machine

on Tuesday than Monday. Subsidiary
 Is performance on time
core or subsidiary?

It depends on the contract.

Expression: ‘Time as of essence of
contract’

It is used to make
performance on time
a core or condition.
 Example
Contract: Hotel Guest

Clause 5: Welcome guests with flowers.

Clause 6: The hotel will serve breakfast from 7.00

AM onwards.

Clause 28: Time is of essence of the contract.

The customer can terminate the contract if

breakfast not served at 7.00 AM.
 Exercise:

Termination of Contract- Breach

Page 73
1. Buyer did not pay. The seller terminated. Is the
termination valid?

Answer: No. The seller cannot terminate as there is

no right for him to terminate under the terms.

Should the seller have the right to terminate for

breach of a core part?

No. The courts insist. As the parties have applied

to the question of termination, we take it that they
have provided all they wanted. Importing other
terms will erode sanctity of written contract.
2. Seller made paper communication. Buyer
terminated. Is the termination invalid?

Answer: No. The termination is valid.

12. Termination: The buyer can terminate the contract for

breach of any term by the seller.

The buyer can terminate for any breach, no matter

how insignificant.
3. Seller failed to pay deliver a watch at 5.00 PM.
The buyer terminated. Is the termination
unjustified?

Answer: No. The termination is justified.

Once 5.00 PM was past, the seller became in

breach. The buyer can terminate the contract.
4. The seller failed to deliver in time as the truck
broke down. The seller intended to perform. Can
the buyer not terminate?

Answer: No. The buyer can terminate.

The right to terminate arises on breach. Intentions

do not matter.
5. The buyer refused to take delivery. The seller
terminated. Is the termination valid?

Answer: No

Under the terms, only the buyer has the right to

terminate.
A B

Accepted

Offers to modify

Contract

Contract is modified
A B

Accepted

Offers to terminate

Contract

Contract terminated
A B

Accepted

Offers to terminate with

amount mentioned.

Contract

Contract terminated
with damages
A contract can be terminated
by mutual consent
with or without damages.
 Exercise:
Question 10 and 11

Termination: The buyer can terminate the contract

for breach of any term by the seller.

Page 75
10. The buyer offered to terminate but the seller
rejected. The contract subsists.

a. The buyer refused to take delivery.

Can the seller terminate the contract? No

12. Termination: The buyer can terminate the contract for

breach of any term by the seller.

The seller has no right to terminate the contract.

The seller can claim damages.

10. The buyer offered to terminate but the seller
rejected. The contract subsists.

b. The seller reasoned no point attempting deliveries.

Failed one month. The buyer terminated the contract.
Is the termination valid?
Yes

The seller is in breach.

The buyer has the right to terminate the contract.
10. The buyer offered to terminate but the seller
rejected. The contract subsists.

c. The seller brought deliveries each month.

The seller must keep doing his duties, if not he

would be in breach. The seller has done this.

The seller will claim damages for each breach.

11. Contract term to let the buyer get out of the
contract.

Termination for convenience: The buyer can terminate the

contract at any time for his convenience.
 Exercise

Termination of contract- Convenience

Page 77
1. Seller failed to deliver on September 1. Can the
buyer terminate?

No.

The terms require a 30 day notice to cure the

defect.
2. The batteries were not in conformity. Can the
buyer terminate immediately?

No

The terms require a 30 day notice to cure the

defect.
3. The buyer failed to pay. Can the seller terminate
the contract?

No

The seller has no right to terminate the contract.

4. The buyer terminated for convenience. The seller
suffered losses of Rs. 30, 000. Can the seller claim
the damages from the buyer?

No.

Damages to be paid for breach. The buyer is not in

breach.

Termination for convenience is a right. The buyer

has exercised the right.
5. Can the seller terminate the contract for
convenience?

No

The right to terminate under convenience is only for

the buyer.
6. Delivery site inaccessible on the due date due to
flooding.

The seller has to only follow the contract terms. He

is under no obligation to accept changes.

The impossibility has given the right to the seller to

declare the contract frustrated (terminated due to
impossibility).

The seller is not in breach for the buyer to terminate

the contract.

The buyer cannot claim damages as the seller is

not in breach.
7. Law bans production or sale of the batteries. Can
the seller terminate the contract:

Yes

The law has prohibited the activity creating an

impossibility. This gives the right to the seller to
terminate the contract.
1. Not enforceable.

Requires to do an impossible act.

2. Not enforceable.

Impossibility may last long or be permanent.

3. Enforceable.

It is reasonable.
 Termination Clause

1. For breach- (Damages will be paid by the party in

breach)

2. For convenience- Termination is a right.

3. Force Majeure- Buys time and prevents immediate

termination on impossibility.

The details under each head would depend on the

nature of the contract and bargaining power of the
parties.
Illustrations
Termination clause in online stores:

Online stores have come to put a clause- ‘The store

can terminate the contract if it has made a mistake
in pricing.’
Amazon UK
Amazon Cancelling Xbox Elite Controller Pre-orders
After Listing Incorrect Price
Mistake in price … we will check if you want to buy
at the right price

or else, we will cancel your order.

SBI Card
Termination for breach
Termination for convenience
of SBI Cards
Termination for convenience
of the customer
Indigo Airlines
Impossibility principle is
reiterated and strengthened.
Termination Clause in GCC

Clause 29