Online Reporter
Trust Maanda
Legal Position
WHEN parties enter into an agreement, they often list the grounds on which that agreement may be cancelled by either party to the agreement.
Parties often include the cancellation clause. This clause states how and when the parties may be entitled to cancel the agreement.
Where parties state how their agreement may be cancelled, the party which seeks to cancel it must cancel it in terms of the dictates of that agreement.
If they cancel it otherwise than the agreement stipulates, the other party may reject the cancellation. This then means the party rejecting the cancellation holds the cancelling party to the agreement.
The issue of cancellation can then become a subject of litigation where one party says the agreement remains in existence, while the other says it was cancelled.
Cancellation of a contract is lawful when it is in accordance with the terms and conditions of the contract between the parties.
For example, if the agreement says before cancellation, the party which seeks to cancel must give notice to the other party, say of 30 days, to correct the breach, then the innocent party must give the requisite notice.
It is after the period given for the guilty party to remedy the breach that the innocent party can then cancel the agreement.
If the innocent party acts emotionally to immediately cancel the contract, he or she is in breach of the contract if he or she does not cancel it in terms of its provisions.
The guilty party will argue that there was no proper termination therefore the termination is invalid.
If the agreement stipulates how the notice to rectify the breach before termination, then that notice has to be served in accordance with that agreement. If it stipulates postal service, so be it. If it says it can be sent via email to an address stated in the agreement, so be it. If the notice is given otherwise than is stipulated, the other party may deny ever receiving it. This is where it is necessary to state the address where notices or court process will be served in the event that the need to serve arises.
Cancellation is also lawful where there has been a repudiation of the contract which is accepted by the innocent party. Repudiation is a breach by a party showing that he or she has no desire to be bound by the contract, entitling the innocent party to be relived from future performance of his or her obligations. In that case the innocent party has a right to elect to accept or reject the unilateral act by the other party to try and bring a contract to an end. If the innocent party rejects the repudiation as a breach of contract by the other party, the innocent party can hold the other party to his side of the bargain provided, he discharges his own obligations under the contract.
Where the innocent party accepts the repudiation, he or she can elect to cancel, as long as they follow the procedure for cancellation as agreed by them in their agreement.
If you do not show that that the cancellation was in terms of the agreement the other party is entitled to reject the cancellation of the contract as a breach and hold the cancelling party to his or her side of the bargain.
Main formalities for cancelling an agreement are mainly that you must review the contract to identify termination clauses, notice periods, and mandatory penalties.
You then send a written notice of termination formal, which clearly state the intent to cancel, the effective date, and the reasons for termination.
Ensure the notice is delivered at the chosen address as required by the contract or by means agreed upon, for example, registered mail or email.
If the cancellation is mutual, then both parties agree to terminate, sign a formal document outlining the end of obligations to avoid future disputes.
The lesson to learn is that two wrongs do not make a right.
If one party is in breach, the other party cannot just cancel the agreement without following the provisions on cancellation that are stipulated by the contract.
It is like in an employment agreement where the employer finds that the employee has committed a misconduct. The employer cannot summarily dismiss the employee without a hearing.
The employer must follow due process of a disciplinary hearing and dismiss. Doing otherwise will be akin to taking the law into one’s own hands.
The same applies to agreements.
You do not just summarily cancel without following the procedure of termination where the procedure is agreed to in the agreement.
Improper cancellation can lead to lawsuits for breach of contract or claim to hold the cancelling party to the contract.
Trust Maanda is a legal practitioner and a partner at Maunga Maanda And Associates. He writes in his personal capacity. He can be contacted on +263772432646
