Change and Termination by Agreement 

Commercial developments and trading relationships will inevitably change and things may go wrong. Ideally the contract and or terms and conditions of business will have anticipated most problems or issues that might arise.

If circumstances demand that a variation to a contract takes place, there is normally little problem if you and your supplier agree to it, although the contract may require the variation to be in a particular form.

In addition, if one party makes a concession for which the other gives no consideration then the change may need to be made by deed. If the parties agree to terminate a contract, this is again straightforward but it ought to be recorded in writing.

Breach of Contract and Termination by One Party Only 

If only one party wants to vary or end the contract (unilaterally) and as a result repudiates the contract then, failing negotiation, the other can generally sue for breach of contract to recover any losses he may suffer as a result. Where the breach is of a fundamental term (one which is critical to the contract) or where a term is stated to be ’of the essence’ the innocent party can also consider the contract to be terminated as well as claiming damages.

Damages for breach of contract are intended to compensate for the loss and damage suffered by the innocent party. However, consequential losses (e.g. profit from resale) will normally be excluded in the supply contract or terms and conditions of sale and one cannot normally recover damages for purely financial loss. An innocent party is under a duty to reduce (or mitigate) the extent of the damage he suffers.

Sometimes a contract will stipulate a fixed level of damages for default. If this figure is considered by the Court to be a penalty against default rather than a genuine pre-estimate of loss, the term will not be enforceable. Anticipating the possibility of you and your seller ending up in a dispute, a clause agreeing applicable law and dispute resolution issues would be advisable (particularly in international transactions) so that you agree whether to settle a dispute in the Courts or, instead, opt for arbitration or the increasingly common, alternative dispute resolution (ADR).