What is it?

One of the avenues mentioned in How to Get Out of a Contract was repudiation. Discussed in one of our earlier blog posts was the difference between Repudiation and Rescission.

Repudiation is when one of the parties is no longer willing or able to perform what was promised in the contract. This can be in the following forms:

  • Words or conduct
  • Combination of small breaches
  • An insistence upon interpreting the contract incorrectly

The most common occurrence is when a party has openly declared that they will be unable to perform the obligations outlined in the contract. The court does require a clear indication of this unwillingness to perform.

A repudiation may give you the right to terminate the contract.

What can do you in response?

If this has happened to you as in, you are in a contract and willing to perform your contractual obligations. However, you believe the other party has repudiated the contract there are two options available to you:

  1. Continue with contract
  2. Accept and elect to terminate contract

Because repudiation does not terminate the contract the innocent party is allowed to decide on how to proceed.

Important to note that the innocent party should not continue their operations as to accept the repudiation or even the performance of that contract. If you do incorrectly assume that the other party has repudiated the contract and terminate the contract without being able to do so. Then you can be held to have repudiated the contract yourself and it is critical that you analyse the situation carefully.  

Termination?

If you decide to terminate the contract and both parties have gone down that path then there is no need to fulfil their obligations under the contract. Post acceptance the innocent party may be able to have a cause of action to obtain damages.

Conclusion

Contract law often requires legal advice when it comes to reviewing the terms and understanding the situation at hand. In these circumstances of a reupdiation, it is best to consult with a contract lawyer.

Unsure where to start? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

Abhinav Parashar

Abhinav is a legal intern at LawPath as part of the content team. Currently in his 3rd year studying a Bachelor of Laws at Macquarie University (Major in Banking, Corporate, Finance & Securities Law). He is keen to learn more about Mergers & Acquisitions in the future.