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Contract Cancellation Fails

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

Just because a term in a contract is breached does not necessarily mean that the contract can be rescinded, as was demonstrated by a dispute between a company that owned land and a wind farm company.

The company that owned the land entered into an agreement with the other company that the latter would develop a wind farm on its land. The agreement stipulated that the firm wishing to construct the wind farm had to provide the landowner with a copy of any application for planning permission, so that it could comment on it before it was submitted to the local planning authority.

The wind farm company submitted an application for planning permission without first sending it to the company that owned the land. The agreement between the two companies stipulated that if the wind farm company committed a material breach of the agreement, the company that owned the land was entitled to terminate the agreement provided that the breach could not be rectified or was capable of being so but this had not been done within a reasonable time after receipt of a written notice that the breach had to be rectified.

A notice was served on the wind farm company, which duly supplied the landowner with a copy of the application for planning permission, within 21 days. However, the company that owned the land still issued a notice to terminate the contract. The dispute ended up in court.

The court ruled that although the failure to submit a copy of the planning application was a material breach of contract, it was capable of being remedied and was in fact remedied by the issuing of a copy of the planning application. Indeed, the letter from the landowner requesting a copy of the planning application had to be interpreted as indicating that the breach of contract was capable of being remedied by supplying the requested information.

Although this case was heard in Scotland, it is to be expected that an English court would take a similar view. If a contract you have entered into looks like it will lead to a dispute, contact us for advice.

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