Contract Termination, Cancellation and Force Majeure

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Many contracts will include explicit terms setting out the various ways in which that contract may be terminated. Generally speaking, a termination clause is a clause that sets out when and how the contract can be terminated, as well as describing the rights and obligations of the parties after the contract is terminated.

Voluntary Termination Clauses

Some contracts will contain a termination for convenience clause, which would allow one (or both) parties to terminate the contract for any reason without any penalty. Similarly, an early termination clause may also impose monetary orother penalties to a party who wishes to trigger an early termination to a contract. Often, the ability to terminate, either with or without a penalty, will only be available in certain situations or for limited periods of time.

Other Grounds for Termination

Further, there are a wide variety of circumstances that may result in the termination of the contract even where there is no contractual language dealing with those issues. In some situations, the court will treat the contract as terminated, and attempt to put the parties in the situation they would be in had the contract been completed. In other situations, the court will rescind the contract, and attempt to put the parties into the situation they were in before the contract was created.

Some potential grounds for termination or rescission include:

    • Illegality
    • Mistake of Fact / Non Est Factum
    • Agent’s lack of authority
    • Fundamental breaches / Discharge by breach
    • Pre-contractual misrepresentations
    • Repudiatory breaches or anticipatory breaches
    • Renunciation / Refusal to perform
    • Statutory rescission
    • Common law rescission
    • Inequality of bargaining power
    • Duress and undue influence
    • Rectification, variation, and amendment
    • Failing to meet conditions precedent

Force Majeure Clauses

Force majeure clauses allow for the termination of the contract or postponement of a party’s obligations or covenants where events occur that: (a) were outside the control of the parties, and (b) makes complying with the contract impossible. Because force majeure originates in civil law, and not the common law, the scope and applicability of force majeure in Ontario is determined by the specific wording of the contract. Where a force majeure provision is absent or inapplicable, parties may be able to rely on the common law principle of frustration, though frustration is more limited in its application.

At Gilbertson Davis LLP, we can review your rights, obligations, and options regarding your contract, including options for enforcing specific performance, obtaining alternative performance, or equitable claims for unjust enrichment in the event of a purported termination.

We can also advise and represent you with respect to any post-contractual obligations, including non-competition, non-solicitation, and confidentiality clauses.

Contract Types

We can advise clients on a wide variety of contractual arrangements, including:

    • Agreements of Purchase and Sale
    • Bills of Exchange / Promissory Notes
    • Commercial Contracts
    • Commercial Leases
    • Creditor/Debtor Agreements
    • Employment Contracts
    • Entertainment and Media Contracts
    • Event Contracts
    • Franchise Agreements
    • Guarantees
    • Insurance and Reinsurance Contracts
    • Joint Venture Agreements

If you are having concerns about the future of your contracts, or have any concerns at any stage of the contract process, contact Gilbertson Davis LLP to arrange an initial consultation.  Do not delay, since time may be of the essence and your rights and obligations may be affected by delay in taking the proper course of action.

Other Termination Clauses

Many contracts will also contain clauses which will call for an automatic termination of a contract if certain events occur (or don’t occur). These clauses can relate to:

  • Assignments
  • War clauses
  • Change of Law
  • Force Majeure, Acts of God, or other unexpected events
  • Impossibility or Frustration of contract
  • Non-performance or partial performance
  • Concert Cancellation
  • Non-payment, late payment, or partial payment
  • Bankruptcy
  • Cooling Off Periods
  • Conditions for Renewal
  • Illness or death
  • Waivers
  • Event Cancellation
  • Non-Appearance

Please contact Gilbertson Davis LLP to arrange an initial consultation.