Remedial Work for Contract Breaches: Legal Considerations

When you hire a supplier to deliver services, you expect them to meet their contractual obligations. However, if they commit a very serious breach that goes to the heart of the contract (often referred to as a material breach), you may want to terminate it. Many agreements include termination rights for material breaches, but enforcing those rights is not always straightforward. You may also need to take advice on your legal options, based on the specific circumstances, to avoid the risk of contract disputes. This article explores the importance of a written contract with suppliers, how breach remedy provisions work from a contractual perspective, when a supplier may have a contractual chance to fix a breach, other potential remedies your contract could offer and what steps a customer must take before terminating a contract.

How Can Your Contract Offer Remedies to Protect You From Risk?

A well-drafted supplier contract protects your business by setting clear expectations and enforcement rights. It should define the agreed services and performance standards and specify how breaches are handled.

Contracts often include termination rights for serious breaches. If a supplier fails to meet their obligations, your contract should state whether you can terminate immediately or must follow a cure process first. If your supplier has the contractual right to remedy a breach, you may need to allow them a specified time to fix it before terminating.

Supplier contracts can also include remedies as well as just termination, such as service credits, where the supplier compensates you for performance failures, and indemnities, which hold the supplier accountable for financial losses you suffer caused by their actions. 

Can Your Supplier Remedy Breaches?

‘Material breaches’ are typically those that substantially affect the contract’s purpose or deprive one party of the expected benefit. Because the meaning of a material breach can vary, well-drafted supplier contracts should clarify what qualifies as a material breach. This can help avoid the risk of disputes and ensure both parties understand their obligations.

Many supplier contracts allow termination for a material breach only if the supplier does not remedy the issue within a set period. For example, a contract may state that the customer can terminate the agreement if a supplier commits a material breach and does not fix it within 14 days of receiving notice.

Contracts may also differentiate between remediable and irremediable breaches. A remediable breach (as defined by your contract) allows the supplier to fix the issue within a specified timeframe. If they do so, the customer cannot terminate for that breach. By contrast, an irremediable breach can give the non-breaching party the right to terminate immediately. If the contract does not clarify whether a breach is remediable, disputes may arise.

Many contracts also contain cure periods, requiring the breaching party to fix a breach before termination. If a supplier’s breach is remediable, the customer must generally give formal notice and allow time for the supplier to resolve the issue. 

Ensuring your contract distinguishes between the types of breaches can help prevent legal uncertainty and the risk of disputes.

What Does Remedying Breaches Mean?

Remedying a breach requires the supplier to take corrective action to restore compliance with the contract. If your contract requires you, as the innocent party, to allow the supplier to fix a violation, you must allow them time in line with contract terms before terminating the agreement.

Cure provisions can also benefit your business. They can help preserve commercial relationships by encouraging suppliers to fix performance issues, reduce disputes by offering a structured process before termination, and minimise disruption and costs, as terminating a contract may be expensive and time-consuming.

While termination may seem the easiest solution, allowing your supplier to fix the breach can be more commercially practical. If the breach is resolved within the cure period, you may achieve the same result without finding a new supplier.

Why You Should Review Remedies Before Agreeing to a Supplier’s Terms?

Before signing a supplier contract, you should carefully review the available remedies. The required remedies will depend on the nature of the services, potential risks, and your bargaining power.

If a contract heavily favours the supplier, you may struggle to enforce your rights later. Understanding remedies before signing can help prevent your business from facing risks later. 

Key Takeaways

A supplier contract should establish remedies and termination rights if the supplier breaches their obligations. Most contracts require you to follow a cure process before terminating for a material breach. You may lose the right to terminate if the supplier fixes the breach within the cure period. An irremediable breach may allow immediate termination, depending on the contract terms. However, you should seek legal advice if unsure whether a supplier’s breach justifies termination.

If you need advice on negotiating supplier contract remedies, our experienced contract lawyers can help. As part of our LegalVision membership, you get unlimited access to lawyers for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.

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