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A recent Court of Appeal judgment, dealing with a situation where a party has suspended or delayed compliance with its contractual obligations, is likely to be of interest to many businesses. The economic downturn has made this scenario increasingly common in a number of commercial sectors, as parties reassess their priorities or simply struggle to fund their earlier commitments. In this case, the court held that a landlord was not in repudiatory breach of an agreement for lease when it delayed construction of a development due to difficulties in obtaining finance.
Businesses should be advised that the best solution remains, as always, to identify key aspects of the parties’ performance when the contract is being negotiated, so that they can include express provisions addressing when termination is permitted and the financial consequences of that termination.
This checklist highlights the key issues that a business should consider when negotiating contracts.