Chapter 17 Determination

It is popular for a termination right in a contract to be drafted as a right to terminate the contract but in reality it is only the performance of future obligations that are being terminated. The contract terms will usually continue to apply in respect of what happened before termination.

Historically, the courts have looked on termination as a ‘discharge’ from further performance of the contract. In the past, contract drafters often used ‘determination’ rather than ‘termination’, perhaps to indicate the determination that needed to be done of those future obligations that had already finished and those earlier obligations which were continuing.

In the construction industry, it was common for a contractor’s engagement or a consultant’s employment to be ‘determined’ rather than for the contract to be terminated, but this has largely fallen out of use.

In some cases, for example where something invalidates the contract from forming (such as a misrepresentation, fraud or undue pressure to sign the contract), a rescission or termination will mean the contract is set aside so that the parties can be restored as much as possible to their original position.

Updated January 2020