Termination - The Need To Prove A Contractor Is In Default In A Long-term Contract

• Published date: 20 September 2022
• Subject Matter: Corporate/Commercial Law, Contracts and Commercial Law
• Law Firm: Barton Legal
• Author: Mr Bill Barton

Terminating a long-term contract is far from straightforward, and in particular, proving a Contractor's default is very difficult, given the risk of allegations as to repudiatory breach.

In long-term contracts, Contractor default can be triggered:

• By a failure to meet certain objective performance thresholds;
• By reaching particular levels of deduction made for unavailability or service default; or
• By a catch-all "material breach" provision whereby a serious breach by an SPV can give rise to "a right to terminate".

FIDIC Silver Book 2017 clause 15.2, details the six circumstances which give the Employer the right to terminate the contract due to the Contractor's default. The most contentious provisions are:

• Clause 15.2(b) - abandons the Works or demonstrates an intention not to perform the Contractor's obligations under the Contract.
• Clause 15.2(c) - without reasonable excuse, fails to proceed with the Works in accordance with Clause 8 Commencement, Delays and Suspension.

Although the contract includes the above provisions, the Employer is usually required to prove the Contractor's default by identifying factual evidence which supports the grounds for termination. This is important as the consequences for wrongfully terminating a contract can lead to substantive claims for damages.

Proving clause...