The Employer as stated before terminated the Services of the Contractor based on R11 at Clause 91.2. As the contract was Task Order based, the Employer issued no more Task Orders in accordance with terms of the contract, thus no more work was available to the Contractor. The Contractor did not affirm the contract continuation, left the site but contested the termination as wrongful and referred the matter to adjudication.
Under English common law, a party that purports to operate a contractual termination clause, when it is not entitled to do so, may repudiate its contract. This is because a party who acts on a contractual termination clause usually ceases to perform its own obligations. Incorrect termination in itself may be a fundamental breach. Hence, if the termination was invalid, and the other side has accepted the repudiation by leaving the site, the terminating party may be liable to the other side for damages for wrongful termination. If a contract is wrongfully terminated, a party can be expected to receive the full contract value of any work done at that time, less sums previously paid, and possibly a sum for loss of profit on the remaining works.
Let’s assume in this case that the Contractor is correct that the Employer wrongly terminated or repudiated the contract, he would then be entitled to recover damages and contractual claims etc as stated above. It’s my understanding that the net result of a Contractor accepting a wrongful termination/ repudiation is that termination is in fact carried out by the Contractor under common law. As has been stated by Jon and Sarah in their answers the NEC3 TSC clause 90.2 expressly bars common law termination of which repudiation is one.
Under these circumstances it appears then, that the Contractor is not entitled to recover damages and other contractual claims. If this is correct, this surely could not have been the intention of the framers of the contract.
A Contractor who believes the termination is wrongful has only one recourse, it seems and that is to affirm the performance by refusing to accept the termination and then declare a dispute. This assumes the Employer in our example, will without a fight, continue issuing the Task Orders!It may be better to leave the declaration of a dispute to the Employer.For the Contractor it would of course be a commercial decision as to whether to affirm the contract or just walk away with no claim with the real possibility of incurring costs under Clause 93 and temporally ‘loss’ of the Plant under Clause 92.1. I just wonder what the effect is of an adjudicator agreeing with Employer that in fact the termination was lawful but due to the affirmation the work had continued?
Is there something I am missing? I do think Rob’s view that there is way out under common law is quite plausible but I offer no solution.