International Construction Law Review
THE QUANTIFICATION OF TERMINATION CLAIMS IN CONSTRUCTION
FRANCO MASTRANDREA
LLB (Hons), MSc, PhD, FPJCS, FCI Arb, Barrister
I. INTRODUCTION
The object of this article is to carry out a brief survey of the quantification of claims for the termination of further performance under a lump-sum building contract at common law and to explore some of the areas which may give rise to difficulties in practice.
II. COMMON LAW GROUNDS
The (modern) rule of (Commonwealth) law holds that the effect of termination for breach of contract1 is to remove the obligation further to perform. The classic statement of this principle is that of Dixon, J, in McDonald v. Dennys Lascelles Ltd,
2 who said:
“When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract … When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach.”
A good deal of confusion had been created by loose terminology in earlier cases. In particular, “rescission” was often said to be available for appropriate breaches of contract. This was conceptually problematical; rescission ordinarily implies the undoing of the contract ab initio.
English law was authoritatively set on its modern standing in Heyman v. Darwins Ltd.
3
1 This article includes reference to a number of US cases. Although there appears to be no established consistency in terminology, “termination for breach” is an expression which many US lawyers may consider unsatisfactory. “Cancellation” appears to be closer to the US position, thus: (1) the Uniform Commercial Code, s. 2–106, defines “cancellation” as a party’s power to put an end to the contract for breach by the other; (2) “termination” by contrast is usually reserved for the situation where a party puts an end to a contract otherwise than for its breach.
2 [1933] HCA 25.
3 [1942] 1 All ER 337 (HL).
[2008
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