Termination Of A Commercial Contract – Validly Notified?

A recent case SABIC UK Petrochemicals Ltd v Punj Lloyd Ltd [2013] EWHC 2916 (TCC) discusses some issues and risks that arise when terminating a contract. The case involved an EPC contract awarded to a subsidiary of the Defendant for the development of a polyethylene plant for SABIC (the Claimant) in the UK. Ultimately, after a number of delays in carrying out the works, the Claimant, after first sending a warning letter to the Defendant, terminated the contract and called in various payment and performance guarantees.

The key issue in the case was that the Defendant argued that the termination was invalid because the notice did not identify the termination clause by number, it did not identify the breach in sufficient detail and that the seven-day rectification period in the warning letter was too short.

The judge, in deciding for the Claimant, held that:

such a termination notice, although required to refer to the actual termination clause in the contract, did not need to identify it by clause number; where a warning is given of a failure to exercise due diligence, the grounds for termination did not necessarily need to particularise the Defendant's failures; and even if the seven-day rectification period was too short, this would not take away from the fact it was a termination notice - it would merely allow for more...