Termination Agreement Practical Law
With respect to the retention of damages, a party may, under customary law, claim « Loss of Bargain » damages to reflect the missed opportunity to perform the contract following early termination (see Lombard North Central plc v Butterworth), but must ensure that the damages are not too far away. Similarly, the « shortfall » can be recovered, although this depends on the facts. In order to determine whether such losses are eligible, the courts will in particular examine the specific knowledge and expectations of the parties at the time of conclusion of the specific contract. In some cases, a contract does not provide for termination, so the principles of refusal will apply in accordance with the common law. A repugnant infringement is a serious breach that goes to the heart of the contract, so that the innocent party, once committed, may be allowed to leave without being held liable for damages to the other party. Examples of repugnant violations are treaty waiver (a clear refusal to comply with obligations); violation of a condition; or a sufficiently serious breach of an interim period (.b condition or warranty). The Court of Appeal agreed to the District Court and applied a two-step test to determine whether Arunvill had the right to quickly terminate the contract: it is necessary (1) to identify the « material breach » indicated and (2) to determine whether this offence has been cured. A mere declaration of healing intent is not enough to repair the offence. As a result, Arunvill had the right to terminate the contract without notice.
As Moylan LJ admits, that decision does not raise fundamental questions as to the interpretation of essential infringement clauses. However, it is useful to remind parties who infringe an infringement that, in cases where the nature of the obligations (provision of services) and the contractual conditions (within 21 days) are so clear, the actual performance of the obligations is necessary to remedy the infringement and that a mere declaration of intent to perform is not sufficient. In a recent decision by the Privy Council, Attorney General of the Virgin Islands v. Global Water Associates Ltd, a breach of the First Design Construction Agreement (DBA) for the construction of a water facility was so serious that the second Management, Operation and Maintenance Agreement (MOMA) was ineffective for the facility. The inability of the Government of the British Virgin Islands (BVI) to provide a site in accordance with the contractual terms led Global to effectively terminate the DBA and seek damages in respect of the profits it allegedly made under the MOMA, but for the government`s negative breach of the DBA. The government argued that such losses were too far away to recover. . . .
