Termination of Contract

If a breach of agreement is substantial, the injured party may terminate the agreement. Termination is a unilateral legal act. The effect of termination of contract is that the contract ceases to bind the parties and the parties no longer have any contractual obligations. All performances done are usually returned.

Usually there are no requirements in respect of the formality of the notice of termination, unless otherwise agreed between the parties or prescribed by law. The notice to terminate must set out the reason for termination, i.e. the breach of contract must be clearly identified.

It is advisable to always terminate a contract in writing.

A notice of termination must be made within a reasonable period of time after the injured party has found or ought to have found the other party's breach of contract.

Contracts usually set out conditions for termination of contract. The conditions may refer to the requirement of essentiality or to the termination process. For example, a condition of a warning prior to termination is quite common.