Cancellation vs termination for serious breach

JONES v TATE (CA) [2011]

This case discussed the distinction between the right: (1) to have a contract set aside from the outset so that the parties are put back into the position they were in before the contract was made; and (2) to terminate a contract for serious breach, which simply brings the contract to an end in terms of future obligations.

Firstly, by way of explanation:

Right to have a contract set aside

This is effectively the right to cancel an agreement or, using the legal term, to ‘rescind’ the contract from the beginning. Rescission is one of the remedies available for pre-contract misrepresentation at the Court’s discretion. It will not be available if one of the so called ‘bars to rescission’ is present: such as a party having acted as though it intends the contract to remain in place or simply because of a delay in acting.

Right to terminate for serious breach

This arises where one party commits a breach which goes ‘to the root of the contract’. This has sometimes been expressed as a breach which ‘deprives a contracting party of substantially the whole benefit of the contract'.


J agreed to purchase some farm buildings subject to a condition that within six months the seller, T, would arrange for the buildings to be connected to his own, independently metered water and electricity supplies. When T failed to do this, J claimed to have rescinded the contract and claimed damages to put himself in the same position as if he had never entered into the purchase contract.


Point to Note:

The different consequences of a right to rescind and a right simply to terminate and claim damages are potentially very considerable. This is why it is important to understand the distinction between the two rights and the separate situations in which they will apply.

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