When may one cancel a contract?
Category 3%.Com Properties
This a tough one.
Before one can even begin to answer this important, but often vexed question, it is important to understand the nature of a legal contract.
What is a contract?
In essence, a contract consists of an unconditional offer by the offeror (a party who makes the offer) and an unconditional acceptance by the offeree (a party who accepts the offer). A Legal contract and a legal agreement are one and the same thing, which is used interchangeably. Once the unconditional acceptance of the unconditional offer has been communicated by the offeree to the offeror, a contract is concluded.
Simply put, a legal contract is a bundle of rights and corresponding obligations. If a party fails to do, that which he promised to do under the agreement, it is a breach of the agreement.
A legal contract is different to a social agreement. For instance, if two friends agree to go for lunch and the one friend stands the other one up, there is still a breach of this agreement, but there are no legal consequences.
A legal contract is a legally binding agreement with legal consequences and obligations for all the contracting parties concerned.
Why are there contracts?
The primary reason why parties enter into a contract is to ensure that the promises they make to each other, are kept.
If the promise or undertaking is broken (for instance, by failing to perform the promised obligation, or when a party performs the obligations set out in a defective or incomplete manner), it constitutes a breach of the agreement and it could be the triggering event for cancellation.
The circumstances under which a party may cancel an agreement
A breach of a contract is not only the ground for cancellation. Sometimes a party may cancel the contract although there has been no breach.
Under the Consumer Protection Act, a 'consumer' may in circumstances (e.g., during the 'cooling off' period) return the purchased goods to the 'supplier,' although there has not been a breach of the contract.
Not every breach, necessarily, entitles the other (innocent) party to cancel. The breach must be of a 'material breach' or one which 'goes the root of the contract.'
But the law is never simple.
And so, there are contracts where the innocent may cancel it, even if the breach is of a trivial nature. This is the case where a contracting party has baked a right of cancellation into the contract. (The so-called 'Lex Commissoria').
Today, almost all contracts for the sale of immovable property, which must be in writing to be enforceable, have a Lex Commisoria which is linked to a notice period.
That is, if the contract is breached the 'innocent party' must first give the 'guilty party' written notice to remedy the breach within a stated period, as prescribed by the contract, before he or she may cancel it.
However, the innocent party also has some remedies that he or she can invoke when the guilty party does not perform.
The rights an innocent party has when there is a breach
In the event of a breach of contract, the innocent party has the following remedies:
- He/she may claim specific performance - demanding that the guilty party complies with their obligations under the contract.
or - He/she may claim cancellation of the contract - the innocent party withdraws from the agreement.
In both the above situations, whether the innocent party claims specific performance or cancels the contract, he/she may also claim damages for any loss suffered as a result of the breach.
Conclusion
The circumstances under which a party may cancel an agreement are legion and often fraught with uncertainty.
To attempt to cancel a contract and not knowing what you are doing, is inviting trouble.
Therefore, it is highly recommended that you consult your attorney first and to advise and guide you, when you suspect that a breach of the contract has been committed.
3%.Com Properties specialises in contracts relating to the sale of immovable property.
Contact us, if there is any uncertainty or if you would like to find out more!
Author: 3%.Com Properties