Termination Rights in UK IT Contracts -- Use Them or Lose Them

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A recent decision of the UK Court of Appeal illustrates the dangers of failing to address contract breaches and other disputes in a timely manner.

In technology contracts, parties sometimes shy away from breach of contract situations because the underlying causes of default can often be complex—and the parties’ focus is typically on achieving successful delivery or roll-out. But, by ignoring a breach by the other party and instead continuing to perform the contract in a “business-as-usual” fashion, a party may find that it is later prevented from enforcing its contractual rights. In particular, if the contracting party is found to have affirmed the contract, it may lose rights that it would otherwise have had to terminate the contract for breach.

Further when later seeking to rely on the “lost” right to terminate, the party not in breach may find itself in even more hot water because the notice of termination may be deemed to be an “anticipatory renunciation” of the agreement, giving rise to substantial claims against it.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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