Navigating contract termination
How our expertise can save your business costs and headaches
Navigating the complexities of contract termination can be an involved process, especially when faced with uncertainties about the consequences and potential liabilities involved. As experienced commercial dispute solicitors, we understand the intricacies of the relevant law and can offer our expertise to help you make a more informed decision while safeguarding your business interests.
Understanding the consequences
Terminating a contract can have significant implications for your business, ranging from financial penalties to damaging relationships with counterparties. If you are unsure about the potential consequences of terminating a particular contract, it is crucial to seek legal advice before taking any action. We can review your contract, assess the termination clauses, and provide a comprehensive analysis of the potential outcomes including the legal merits and weaknesses, and the commercial options available to you.
Assessing the enforceability of penalties
We have recently advised a long-standing client in respect of a significant payment demanded upon our client’s termination of a services contract. In particular, we considered whether there was scope to argue that the demanded payment amounted to an unenforceable penalty. We concluded that the penalty was indeed unenforceable as there was no justification for the penalty clause (it did not merely seek to protect the legitimate interests of the service provider by deterring termination) and the sum in question was wildly disproportionate in the circumstances.
Generally, penalties that are deemed excessive or punitive may not be enforceable. However, the question as to what amounts to a penalty is not always straightforward to answer. Whether you are seeking to enforce a penalty (and therefore potentially exposing your business to additional costs and legal challenges) or are in receipt of a demand for payment upon termination (which may not be enforceable), it is important to seek legal advice in order to minimise the risk of litigation. Our team can provide clear guidance on the likelihood of enforcement and explore alternative strategies to mitigate any risks.
How can we help?
Our commercial litigation team are experienced in dealing with issues concerning and arising out of contract termination. Whether negotiating with counterparties to reach a mutually beneficial resolution or representing your interests in court proceedings, our objective is to assist you in protecting your business needs and minimising costs and risks associated with contract termination.
