How to end a commercial relationship with a company you have contracted with

HOW TO END A COMMERCIAL RELATIONSHIP WITH A COMPANY YOU ALREADY HAVE A CONTRACT WITH

There are many situations in which a contracting party departs from the agreed terms or fails to perform at all, whatever the contract is called or concerns. The Obligations and Contracts Act gives the party that has complied with the contract different options, depending on how important performance still is. Under Article 79 the creditor may seek performance together with damages for delay, or forgo performance and claim damages for complete non-performance instead. The latter option applies where the creditor can no longer benefit from performance because it is no longer advantageous or needed. Article 80 addresses a different situation: if the obligation is to do something that a third party can do, the creditor may seek authorisation to have it done at the debtor’s expense.

To prevent abuse, the Act also defines the scope of damages. They cover the loss sustained and the profit foregone, but only insofar as both are a direct and immediate consequence of the breach and could have been foreseen when the obligation whose performance is sought arose.

The debtor may be in default through delay: performance is under way, but is late. If the parties agreed on a specific day, the party owing performance is in default once that day has passed. The calendar day specified in the contract must therefore expire before the creditor may claim damages for delay. If the parties did not set a deadline, the debtor is in default on expiry of the period for performance specified in the creditor’s demand. Under the Act this period should be reasonable and sufficient to give a party acting in good faith a real opportunity to perform.

Where the contract imposes obligations on both parties and one fails to perform for a reason for which it is responsible, the other may rescind the contract by giving the debtor a suitable period for performance and warning that the contract will be treated as rescinded once that period expires. If the contract was concluded in writing, the warning must also be in writing. Where performance has become useless to the party that complied with the contract, the creditor may rescind without giving the debtor a warning or a further period for performance.

As a rule, rescission has retroactive effect: each party must return what it received. The parties are treated as though they had not entered into the contract and must restore to one another everything given or done up to that point. The creditor is also entitled to damages for the loss caused by non-performance.

These are only some of the situations the law provides for in contractual relationships and their termination. The particular facts of each case matter. If you are owed performance under a contract that has been breached, seek advice from a lawyer specialising in the law of obligations.