Construction Contract Termination at a Glance
When am I allowed to terminate my construction contract?
You may terminate your construction contract:
- When you and your contractor agree to terminate it.
- When your construction contract contains a termination clause.
- When your contractor commits breach of contract.
- When your contractor repudiates the contract.
A Quick Look at Each Mode of Termination
Termination by Agreement
You and your contractor may come to an agreement to terminate the contact, either expressly or impliedly. An express agreement to terminate may be done orally or in writing, although the latter would be advisable. An implied agreement would require clear, unmistakable conduct showing that neither you nor your contractor require each other to proceed with the obligations imposed by your contract.
Termination Clause
Most construction contracts contain several clauses pertaining to termination. In fact, the standard form contracts in NSW such as those issued by:
- Master Builders Association
- Housing Industry Association
- Fair Trading
all contain termination clauses.
These termination clauses give you the power to unilaterally terminate the contract when your builder or contractor commits breach. Additionally, they lay out the
- timelines
- preconditions
- requirements
that are needed to effect a valid termination – like the service of Notice of Breach and Notice of Termination.
Termination for Breach of Contract
Regardless of whether your contract contains a termination clause or not, you may nevertheless terminate it when your contractor commits a breach of:
- an essential term, or
- an intermediate or non-essential term - provided that the breach is serious
Termination for Repudiation of Contract
Repudiation occurs when one party, by their conduct, shows that they are unwilling or unable to proceed with their obligations under the contract. Similar to termination due to breach, termination for repudiation does not require that there be a termination clause in the contract.
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