How to Terminate a Contract

Definition of a contract:

Is the agreement between two more parties that agree to provide services to each other for a certain amount/period of time.

In contract negotiations, there need to be three main parts: an offer, acceptance of the offer, and consideration (something of value being exchanged). When you extend an offer there are several ways to terminate that offer. Here is how to do it.

1.An offer can be terminated by its terms. Offers can be written such that they expire after a specified amount of time. Or they may be automatically terminated by a specified event.

2.An offer can be terminated by a counteroffer. When a counteroffer is made, the original offer is automatically terminates the original offer and the original offer cannot be honored unless it is reissued by the offeror.

3.An offer can lapse. This is by the passing of a “reasonable” amount of time. This happens when there is no specified termination date set forth in the contract. The amount of time this takes is somewhat subjective and up to interpretation.

4.An offer can be revoked by the offeror. At any time prior to acceptance, the offeror can terminate the offer by notifying the offeree.(Bennett D.A and Hartman L. Pg 816)

According to Richards, (Law of Contract,chapter 2) an offer can be terminated in the following ways: revocation, rejection, lapse of time, failure of a condition precedent, and death.

Termination of a contract:

1. Contract can be terminated due to inability to perform:

This occurs when something unforeseeable happens and prevent the parties from following through with the contract. Example: parties can agree to sell off there car thereafter the car burns out on a terrible accident as the result the parties can no longer continue with the process of selling that car, then the contract is terminated.

2. Contract terminated by breach of contract :

When one party breach the terms of contract then the contract can be terminated. One’s failure to abide by the terms of the contract constitutes a breach of contract. Example Lazaro agree to take Derick out for dinner at his house so that the next day Derick gives him a hand in doing her assignment of business law then Lazaro take Derick out for dinner at corner bar instead of at his house,Derick can terminate the contract of assisting Lazaro with his asignment since Lazaro did not follow the terms of contract.

3. contract terminated by agreement:

This is when both parties agree on termination of the contract. Example the parties agree on the uses of all gas tank and the contract will be terminated when all the tanks are empty.

4. contract can be terminated due to the mistakes fraud and misrepresentation:

When the parties does something improper also the contract may be terminated. When the parties conduct on fraud and misrepresentation of data then that contract is said to be void an Revocation need not be communicated by offeror – can be done by independent 3rd party. ( Bennett D. and Hartman L,Pg 816)

Example: Pickfords Ltd v Celestica Ltd [2003] All ER (D) 265 (Nov)

Defendants approached Pickfords and asked for removal quote Pickfords sent 1st offer on Sept 13th stating: ‘we have an estimated budget figure to include all of the above at £100,000’ (inc. VAT). Pickfords then conducted survey and sent 2nd more detailed quote on Sept 27th stating they would do the work for £98,760 (excl. VAT), defendants sent fax on Oct 15th stating invoice raised ‘not to exceed £100k’ in Court of Appeal, Dyson LJ stated 2nd offer does not always cancel first e.g.offeror quotes £200 per day,Offeree asks for fixed price,oferor quotes £1,500,oferee can accept either offer in this case court held 2nd offer did revoke 1st held that as fax of Oct 15th used words ‘not to exceed £100k’, it must refer to 1st offer so as 1st offer revoked, fax acted as counter-offer thus Pickfords accepted counter-offer when work was carried out note;Fax would have acted as counter-offer even if first offer not revoked as it introduced a new term (‘not to exceed £100k’), Robert W. Emerson.

Definition of invitation to treat:

According to Andy Burrows an invitation to treat is an expression of willingness to negotiate. A person making an invitation to treat does not intend to be bound as soon as it is accepted by the person to whom the statement is addressed. Invitation to treat includes the display of goods advertisement of price or an auction and invitation for tenders.

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd(1953):

EWCA Civ 6 is a famous English contract law decision on the nature of an offer. The Court held that the display of a product in a store with a price attached is not sufficient to be considered an offer, but rather is an invitation to treat. Boots Cash Chemists had just implemented a new method for its customers to buy certain medicines. They would let shoppers pick drugs off the shelves in the chemist, and then pay for them at the till, rather than require all medicines to be behind a counter and for an assistant to have to get what was requested. The Pharmaceutical Society of Great Britain objected, and argued that under the Pharmacy and Poisons Act 1933, this was an unlawful practice. Under s 18(1), a pharmacist needed to supervise at the point where “the sale is effected”, when the product was one listed on the 1933 Act’s schedule of poisons. The Society argued that displays of goods were an “offer” and when a shopper selected and put the drugs into their shopping basket this was an “acceptance”. Therefore because no pharmacist had supervised the transaction at this point, Boots was in breach of the Act. Boots argued that the sale was still only affected at the till.

Whether that is a right view depends on what are the legal implications of this layout, the invitation to the customer. Is it to be regarded as an offer which is completed and both sides bound when the article is put into the receptacle, or is it to be regarded as a more organised way of doing what is done already in many types of shops — and a bookseller is perhaps the beat example – namely, enabling customers to have free access to what is in the shop to look at the different articles and then, ultimately, having got the ones which they wish to buy, coming up to the assistant and saying “I want this”? The assistant in 999 times out of 1,000 says “That is all right”, and the money passes and the transaction is completed. I agree entirely with what the Lord Chief Justice says and the reasons he gives for his conclusion that in the case of the ordinary shop, although goods are displayed and it is intended that customers should go and choose what they want, the contract is not completed until, the customer having indicated the articles which he needs, the shop-keeper or someone on his behalf accepts that offer. Then the contract is completed. I can see no reason at all, that being I think clearly the normal position, for drawing any different implication as a result of this layout. The Lord Chief Justice, I think, expressed one of the most formidable difficulties in the way of the suggestion when he pointed out that, if the Plaintiffs are right, once an article has been placed in the receptacle the customer himself is bound and he would have no right without paying for the first article to substitute an article which he saw later of the same kind and which he perhaps preferred. I can see no reason for implying from this arrangement which the Defendants have referred to any implication other than that which the Lord Chief Justice found in it, namely, that it is a convenient method of enabling customers to see what there is and choose and possibly put back and substitute articles which they wish to have and then go up to the cashier and offer to buy what they have so far chosen. On that conclusion the case fails, because it is admitted that then there was supervision in the sense required by the Act and at the appropriate moment of time. For these reasons, in my opinion, the appeal should be dismissed.( http://www.ehow.com)