LAW2102 · Contract B
Consequences of, and Restrictions on, Termination
Once a right to terminate arises, the innocent party must make an election: affirm (keep the contract on foot, both parties bound) or terminate (discharge future performance, with accrued rights surviving). The election, once communicated or manifested, is generally irrevocable, and termination operates prospectively — it does not rescind ab initio. This chapter also covers the restrictions that can bar an otherwise-available right to terminate — election, readiness and willingness, estoppel, waiver, relief against forfeiture and good faith — anchored by the recent High Court authority Allianz v Delor Vue (2022). It is examined as the second move after a right to terminate is established: what follows from the election, and what might defeat it.
What this chapter covers
- 011. The election: affirm vs terminate once a right to terminate has arisen
- 022. Affirm — keep the contract on foot; both parties remain bound to future performance
- 033. Terminate — future obligations discharged; accrued rights survive (prospective, not ab initio)
- 044. The election is generally irrevocable once communicated or manifested
- 055. Restriction — election to affirm bars later termination on the same breach
- 066. Restriction — readiness and willingness: the terminating party must itself be ready and willing to perform
- 077. Restrictions — estoppel, waiver, relief against forfeiture
- 088. Good faith in exercising contractual powers; Allianz v Delor Vue (2022) on election/waiver/estoppel
Affirm or terminate, and a waiver problem (Topics 6–7)
- 1 markIssue. Has Crest, by continuing to accept performance, elected to affirm (or waived the breach), so that it can no longer terminate on it?
- 3 marksRule. A right to terminate triggers an election to affirm or terminate; once communicated or manifested it is irrevocable, and termination is prospective (accrued rights survive). Continuing to demand or accept performance with knowledge of the breach can manifest an election to affirm or a waiver, barring later termination (election; waiver; Allianz v Delor Vue).
- 4 marksApplication. Crest knew of the repudiation yet for two months accepted and paid for deliveries — conduct consistent with keeping the contract on foot, which can manifest an election to affirm and/or a waiver of the right to terminate on that breach (Allianz v Delor Vue). Counter-argument: if Crest's conduct was equivocal, or reserved its rights, it may not have elected; and a fresh or continuing breach could give a new right to terminate.
- 2 marksConclusion. Crest has probably elected to affirm / waived the right to terminate on the original repudiation and so cannot now terminate on it; it should look for a fresh breach or a reservation of rights, otherwise it is confined to affirmation and any accrued damages.
Key terms
- Election
- The choice the innocent party must make once a right to terminate arises: affirm the contract (keep it on foot) or terminate it (discharge future performance). Once the election is communicated or manifested by conduct, it is generally irrevocable.
- Affirmation
- Electing to keep the contract on foot despite a right to terminate. Both parties remain bound to future performance. Affirmation made with knowledge of the breach generally bars later termination on that same breach.
- Prospective discharge
- The effect of termination for breach: it discharges the parties from future performance only. It is not rescission ab initio — accrued rights (such as a debt already due, or damages for the breach) survive the termination.
- Readiness and willingness
- A restriction on terminating: the terminating party must itself be ready and willing to perform its own obligations. A party not ready and willing to perform may be barred from terminating for the other's breach.
- Waiver
- Giving up a right — here, the right to terminate (or to insist on a term) — by election or by conduct inconsistent with insisting on it. Waiver can bar termination on the waived breach (Allianz v Delor Vue).
- Relief against forfeiture
- An equitable doctrine under which a court may relieve a party from the loss of contractual or proprietary rights that would follow from strict enforcement of a termination/forfeiture, where forfeiture would be unconscionable. One of the restrictions on the right to terminate.
Consequences of, and Restrictions on, Termination FAQ
What is the election and why does it matter?
When a right to terminate arises, the innocent party must elect to affirm (keep the contract on foot) or terminate (end future performance). It matters because the election is generally irrevocable once communicated or manifested by conduct — so a party that keeps dealing under the contract may be held to have affirmed and lost the right to terminate on that breach. The election is the pivot of most consequences-of-termination problems.
Does termination wipe the contract out as if it never existed?
No. Termination for breach operates prospectively — it discharges the parties from future performance but leaves accrued rights intact. A debt already due, or damages for the breach, survive termination. Only rescission for a vitiating factor sets the contract aside ab initio (see the vitiating-factors chapter); termination does not.
What can stop a party that has a right to terminate from exercising it?
Several restrictions: an election to affirm (or waiver) made with knowledge of the breach; a lack of readiness and willingness on the terminating party's own part; estoppel (a representation relied on); relief against forfeiture in equity; and good-faith constraints on exercising contractual powers. Allianz v Delor Vue (2022) is the leading recent authority on election, waiver and estoppel as restrictions.
How do I tell affirmation from waiver in a problem?
They overlap and you can run both. Affirmation is electing to keep the contract on foot, usually inferred from conduct that treats the contract as continuing (demanding or accepting performance with knowledge of the breach). Waiver is giving up the right to terminate (or to insist on a term) by election or inconsistent conduct. In practice, knowing acceptance of performance can be characterised as either — cite Allianz v Delor Vue and argue the bar.
How is this topic examined?
Usually as the second stage of a termination problem: a right to terminate has been established, and the question is what follows. Identify the election (affirm vs terminate), explain its prospective effect and irrevocability, then test the restrictions — most often an election to affirm or a waiver from the innocent party's own conduct, with Allianz v Delor Vue as the anchor. The marks concentrate on whether the right to terminate has been lost.
Exam move
Treat this chapter as the 'what happens next' to the termination chapters. First, lock down the election framework: a right to terminate forces a choice, affirm or terminate; the choice is irrevocable once manifested; termination is prospective and accrued rights survive. Second, keep a short menu of restrictions ready — election/affirmation, readiness and willingness, estoppel, waiver, relief against forfeiture, good faith — and for each note the trigger and the leading authority, with Allianz v Delor Vue (2022) as your go-to for election/waiver/estoppel. The most exam-frequent move is a party that keeps dealing under the contract after a breach: always test for an election to affirm or a waiver, and look for a reservation of rights or a fresh breach as the counter. Put the affirm/terminate fork and the restrictions row into your open-book kit.
