The document discusses terminating construction contracts, including: - The different types of termination under common law and standard form building contracts like the JCT SBC 2011. - The JCT SBC 2011 outlines specific grounds and procedures for termination if the contractor suspends work, fails to proceed regularly, or becomes insolvent. - Wrongful termination is a repudiatory breach that entitles the innocent party to damages but not contract reinstatement.

1. Terminating a contract: getting it right
3 June 2014
Ben Worthington, Senior Associate
ben.worthington@olswang.com | + 44 20 7067 3541

2. Introduction
• types of termination
• termination under the JCT SBC 2011
• wrongful termination
• “termination at will” clauses
• good faith / co-operation clauses and termination
• the power to omit work
• practical tips
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3. Types of termination
• when can a party terminate a contract?
• common law termination
• termination under standard form building contracts
• contractor performance
• contractor insolvency
• employer non-payment
• force majeure
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4. An example…the JCT SBC
2011
• Detailed provisions setting out:
• the grounds for termination
• The relevant procedure (i.e. notices)
• terminating party must not act unreasonably or vexatiously (see
Reinwood Limited v L.Brown and Sons [2008]
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5. The grounds for termination
• The Employer can terminate the contract if the contractor:
• wholly or substantially suspends the Work;
• fails to proceed regularly and diligently with the Work;
• refuses or neglects to comply with an instruction from the CA requiring
him to remove work, materials or goods which are not compliant AND
by such refusal the works are materially affected
• sub-contracts the works without consent
• assigns the contract without consent
• fails to comply with certain CDM regulations
• Contractor insolvency
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6. Recognising a failure to proceed
regularly and diligently
www.constructiveblog.com
West Faulkner Associates v London Borough
of Newham (1994) 71 BLR 1 – the contractor
must proceed:
“continuously, industriously and efficiently with
appropriate physical resources so as to
progress the work steadily towards completion
substantially in accordance with the
contractual requirements as to time, sequence
and quality of work”.
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7. The procedure
• two stage procedure for terminating the contract. The CA must serve:
• a notice specifying the nature of the default;
• a termination notice terminating the contractor's employment under
the contract.
• Note the strict time periods:
• termination notice can only be served where the contractor
continues with a specified default for 14 days from the default
notice.
• right must be exercised within 21 days of the expiry of the 14 day
default period
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8. Wrongful termination
• wrongful termination = repudiatory breach of contract
• innocent party entitled to damages
• no right to "reinstate" the contract
• Losses might include
• demobilisation costs
• supply chain costs
• finance and hire charges
• redundancy payments
• loss of profits
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9. Termination at will clauses
• what is a termination at will clause ?
• are they lawful?
• drafting tips:
• % complete condition precedent
• rights for both parties
• compensation for terminated party
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10. Good faith clauses and
termination
• TSG Building Services Plc v South Anglia Housing Limited: either party, for no,
good or bad reason could terminate at any time before the contract term was
completed.
• Mid Essex NHS Trust v Compass: the Trust was entitled to exercise absolute
right to terminate regardless of good faith clause.
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11. Can I omit work?
• What is the purpose of the omission?
• Abbey Developments Ltd v PP Brickwork Limited
(2003) – “It is implicit in most contracts that an
owner who exercises a power to omit work must
genuinely require the work not to be done at all,
and cannot exercise such a power with a view to
having the work carried out by someone else.”
• Clear words required to over turn this assumption
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12. Key considerations
• What's your strategy?
• Is there a reputational impact?
• Who will finish the work?
• What are the costs?
• Are there other (better) remedies available?
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13. Practical tips
• Check the contractual grounds
• Get your documents in order
• Follow the contractual procedures rigorously. Check:
• notice periods
• Who to serve / address for service
• grounds are set out properly
• Be consistent in correspondence
• Mitigate loss
• Do not delay
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14. If you receive a notice…
• Keep a tight reign on communications
• consider starting a formal dispute resolution procedure
• consider scope for commercial settlement
• respond firmly
• emphasise breaches by the terminating party
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15. Any questions?