A breach of a lease or commercial agreement is a very serious legal matter, but at what point should this result in termination?

If you are the innocent party in the matter you have a number of options available. Firstly you may claim for damages resulting from the breach or demand a specific action of the other party (a court order stating that the party in breach must comply with its contractual obligations). In cases of serious breach, it may be an option to terminate the contract entirely. The action to be taken is determined by the condition that is breached and the degree to which damages arise from the breach.

Under common law, the innocent party has the right to terminate under three circumstances:

  1. Breach of a term deemed essential in the contract

By breaching one of the essential terms of a contract, the innocent party is able to terminate the contract and claim for damages. These damages include not only those up to termination, but also account for future losses arising from the breach of contract.

  1. Repudiation of the contract by a party

This is when the actions of a party make it obvious that there is no intention to perform their contractual obligations, termination may occur. What amounts to repudiation depends on the circumstances of the matter.

  1. Serious breach of a ‘non-essential’ term in the contract

If a breach is serious to the degree whereby it might be considered ‘material’ or ‘substantial’, and either deprives the innocent party of benefit from the contract or ‘goes to the root’ of the contract, the innocent party may be able to terminate the agreement. It is important to note that the definitions of the aforementioned terms may be subjective.

If you have any questions regarding a breach of contract or would like legal advice relating to commercial law feel free to contact me at Allyson@test2.gpla.com.au.

Allyson Richards