NQL is a contractor operating in Queensland. It entered into a contract to purchase a tunnel boring machine from CPPL. It was agreed that CPPL would deliver to Bradfield Downs a CPPL-X built to NQL specifications for a total price of $20 million. The contract included the following:
It was a term of the agreement that the machine was to be delivered on or before 1 September and time was of the essence.
The electric motors were procured by CPPL and delivered to its Ipswich factory and NQL made the first payment. CPPL commenced work and had completed 50 % of the build when staff were reallocated to an urgent job. On 8 June CPPL advised NQL that it was behind in its schedule and that a review would be conducted to determine which
of CPPL’s current orders would be completed and when but that in a “best case scenario” the CPPL-X ordered by NQL would be delivered no earlier than 1 December.
The first concern regarding the provided case is whether NQL can terminate the contract on 8th June.
The second concern regarding the provided case is whether NQL is obliged to pay the rest of the balance of the contract price.
Termination of Contract:
Frustrated in a contract:
Section 56 of the contract law explains that attribution to supervising the event, which is above the control of both the contractual parties making the performance of the agreement impossible. It discharges contractual parties from performing their duties.
Breaching of Obligation:
The contractual parties may perform beaching of their obligation under the law of contract by refusing their liability. They make the performance of the contract impossible by their acts or by partially failing to fulfill the desired duties, which was supposed to be done by them.
Terms in the clause of termination:
The contractual parties may terminate the agreement according to the conditions and terms that include the agreement duration or termination can be done in their own will by issuing a notice of termination or can be done due to incapacity or any change hampering the circumstances to perform the obligation.
In the given scenario, it has been observed that NQL can immediately terminate the agreement on 8 June. This is because CPPL, according to the contractual agreement can not deliver the boring machine ordered by NQL on schedule time provided on the agreement as promised by CPPL. The contractual agreement says that CPPL will deliver machine on or before 1st September. But later on they failed to deliver machine on the stipulated date. The contractual parties may terminate the agreement according to the conditions and terms that include the agreement duration or termination can be done in their own will by issuing a notice of termination can be done due to incapacity or any change hampering the circumstances to perform the obligation.
In the given scenario, it has been observed that NQL is not obliged to pay the rest of the balance according to the agreement or the part of the work that was done under the contract. If the contractual parties perform beaching of their obligation under the law of contract by refusing their liability will be held liable to termination of the contract.