Cancelling Contracts

Friday 3rd April 2020

Most businesses are in money saving mode and trying to terminate contracts that are expensive or not essential to the running of the business. Some businesses are finding that customers are looking to cancel contracts particularly for services where either they are trying to save money now being on a reduced income or through caution to protect against transmission. Other businesses are finding that due to the lockdown they are not able to complete their end of the deal.

So how can you terminate a contract?

Generally speaking it will depend on the terms of the contract and whether the party that wants to terminate is a business or a consumer. There is no one size fits all answer and so you should not just assume that because of the lock down and Covid19 measures you can automatically terminate or have a contract terminated.

Failure to fulfil your part of the contract may mean that you are in breach. This could result in liability for that breach – having to refund deposits or pay compensation for losses as a result of that breach.

You may be able to terminate a contract under a force majeure clause (Acts of God) where circumstances that are neither party’s fault prevent fulfilment of the contract. It is important however that the terms of such a clause are examined to check they include pandemic and that you follow the terms of the clause to the letter – usually the force majeure event has to continue for a specified period of time before the contract can be terminated. The principle of force majeure does not automatically apply you have to have a specific clause.

Certain contracts for personal services may be frustrated if the sole trader dies or is too ill to perform the contract and the contract is time sensitive.

There may be terms in the contract which allow for notice to be given to terminate the agreement. You should ensure that any notice provisions are followed – that you send it by the right method (email does not always count) and to the right address.

Communication is always good. It may be that you can agree to delay delivery or performance of the services until after the lock down. This might be preferable to cancelling or terminating the contract. Remember however all communication should either be in writing or backed up in writing after a conversation so you have a written record of what has been agreed.

For more information or specific advice on your circumstances contact a member of our commercial or dispute resolution teams on 01384 811 811