How to Handle Contract Breaches in NZ

Setting up a contract with somebody else is a great way to ensure that all parties uphold their obligations in an agreement. A contract is an agreement that is intended to be enforceable by the law. However, there may be times where one party does not uphold their obligations. In these circumstances, it means they may be in breach of contract. This article will outline a few tips that will help you handle a contract breach.

Repudiated Contracts

One of the ways someone can breach a contract is through repudiation. Repudiation is when one party declares that they are unable to uphold their obligations of a contract. You are usually entitled to terminate the agreement if a contract is repudiated. This means that the contract is cancelled, and both parties are exempt from any contractual obligations. You must make sure that the contract is actually repudiated, and the courts will usually use an objective test for this. If you terminate a contract when the other party has not repudiated the contract, then you could be liable for damages yourself.  

You will also be entitled to enforce the contract after the other party has repudiated. You may be entitled to seek damages in this case. However, both repudiation and the decision you make afterwards will not necessarily be the final resolution. This means the courts can determine what has happened through your conducts or actions without any express indication of willingness. If you have reason to believe that your contract has been repudiated, it is essential to consult a legal professional. 

Terminate Contract

You are likely entitled to terminate the contract If a party has breached the contract. This will depend on the terms of your agreement. Most contracts will have a termination clause that will allow you to cancel the agreement. If the agreement is cancelled, neither party is required to uphold their obligations under the contract. However, if you decide to terminate the contract, you will not be allowed to seek damages in court. You may decide the terminate the contract because it might not be worth going through the court process to claim damages. Terminating the contract allows you to move on from the contract without any continuing consequence. However, you must ensure you are entitled to terminate the contract by reading the terms carefully. If not, your termination may be invalid, and the other party may hold you liable.

Claim Damages

The most popular option people will use is claiming damages in court. If your contracting party has breached the contract, then this will have to be proved in court. If you manage to prove your contracting party has breached the contract, you will be awarded damages due to the loss you suffered from the contract not being performed. However, this option can be expensive and time-consuming. There is also no guarantee that you will win in court and lose a significant amount of money. 

Your contract may also have a liquidated damages clause. This clause is predetermined before the contract is formed and sets a monetary value to be paid if one party breaches the contract. It is a good way for parties to uphold their obligations. If you have a liquidated damages clause, there will be no need to use the court system. However, there may still be a dispute about the monetary figure agreed upon if that figure is much greater than the loss incurred.

Is There Another Option?

The best way to handle a contract breach is to negotiate with your contracting partner. If they feel they cannot uphold their obligations, the contract may be discontinued. Alternatively, you may alter the contract to make it easier for both parties to uphold their obligations. Communication is vital, and instead of going through the court process, you may find yourself saving time and money by negotiating with your contracting party.

Key Takeaways

Contracts are popular as they are enforceable by the courts. However, you must be able to handle a contract breach when it happens. There are several options you may undertake. You should always negotiate with your contracting party to see if you can still perform the contract. This may involve varying the contract. On the contrary, sometimes your contracting party cannot uphold their obligations. In this case, they may repudiate the contract. You will then be entitled to terminate the contract. This could be a good option as it dissolves either party’s responsibilities. However, you may want to enforce the contract by claiming damages in court. If you need any legal assistance with contract breaches, LegalVision’s experienced contract lawyers can help. Call us today on 0800 005 570 or fill out the form on this page.

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