Termination of a Contract (Leaving Cert Business): Revision Notes

Termination of a Contract

Reasons for a Termination of Contract

There are four main reasons why a contract may be terminated:

1. Performance
2. Agreement
3. Frustration
4. Breach

1. Performance

The contract ends when both parties carry out their agreed obligations fully and correctly. This is the most common method of termination.

• The contract is considered complete.
• No further obligations exist.
• Example: A painter finishes painting a house as agreed, and the customer pays the full amount.

2. Agreement

A contract can also end by mutual agreement, where both parties voluntarily agree to cancel the contract.

• This can happen before or during performance.
• Neither party can sue once they've agreed to end it.
• Example: A couple hires a wedding photographer for a summer wedding. Months before the event, they decide to cancel the wedding. They contact the photographer, and both parties agree to cancel the contract with no penalty.
• Key Point: This must be a mutual decision—one party cannot unilaterally withdraw without consequences unless the other agrees.

3. Frustration

A contract may be terminated due to frustration when an unforeseen event arises that makes it impossible to carry out the contract, and neither party is at fault.

• The event must be beyond anyone's control.
• Performance becomes impossible, illegal, or radically different from what was agreed.
• Examples:
  • A venue burns down before a concert can be held.
  • A supplier dies or becomes seriously ill, and no one else can perform the service.
  • A new law bans the sale of the contracted goods.

4. Breach of Contract

A contract is terminated if one party fails to carry out their side of the agreement or fails to do so properly. This is known as a breach of contract.

• The breach must be serious and affect an essential term of the contract (a condition, not a warranty).
• The innocent party may end the contract and seek a legal remedy (such as damages).
• Example: A company agrees to deliver 500 custom-printed T-shirts for a music festival by Friday. The supplier delivers them the following Tuesday—after the event has taken place. Because the timing was a critical term of the contract, this is a breach of condition, and the festival organiser can terminate the contract and sue for losses.