From Groundbreaking to Deal-Breaking: Repudiation in Construction Contracts
Why did the contractor break up with the construction contract? Because it repudiated their relationship and refused to build a solid foundation!
In the fast-paced world of construction, time, money, and trust are the foundations of every project. But what happens when one party signals—through actions or outright refusal—that they won’t honour their commitments? This is where repudiation comes into play. Whether it’s a contractor abandoning work, an employer refusing to pay, or delays so severe they undermine the entire project, repudiation can lead to costly disputes and legal battles. It isn’t merely just a “dramatic exit” or a “gentle misunderstanding.” It is a legal concept, and it can significantly alter the course of the project.
Repudiation: when “breaking up” is more than just a heartbreak
Anticipatory breach is used as a synonym for repudiation, meaning that repudiation happens when one party makes it clear, either through their words or actions, that they will not be performing their obligations under the contract before (hence anticipatory) the actual performance is due. In other words, they “break the contract,” in advance.
In a contractual agreement between two parties, each party is obligated to fulfil their respective duties. If one party’s failure to perform undermines the core of the contract, rendering it unfair or unworkable, the other party may have a legitimate basis to withhold their own performance, particularly when the failure results from the other party’s misconduct.
As mentioned by Christie (2006), the concept of repudiation overlaps with the concept of breach which justifies cancellation, however, it is very important to note that they are by no means identical even though the same conduct may amount to both breach and repudiation.
In construction contracts, the right to terminate is the right that flows from the breach of a condition in a contract, repudiation of the contract or fundamentally breaching the contract.
“It’s Not Over ‘Til You Say It’s Over: Navigating the Fine Art of Contract Breakups”
It is very important for both parties to the contract to be aware that repudiation by one of the parties does not automatically end the contract. The aggrieved party still has a choice when he/she becomes aware of the repudiation. They can either accept the repudiation and terminate the contract or they can affirm the contract and insist that the defaulting party continues performing.
The aggrieved party has to choose to end the contract in order to terminate it. Even if the aggrieved party intends to terminate but does something that implies, they still want the contract to continue (e.g. they continue to perform their own obligations or they wait too long to act), it can be viewed as though they are affirming the contract. Affirm refers to giving up the right to terminate the contract and then holding the other party to their obligations.
To avoid accidently affirming the contract, even when the intention was to terminate, the aggrieved party has to:
- Act quickly
As the aggrieved party, do not delay the decision of termination.
- Stop performance
The aggrieved party should not continue performing his/her obligations to the contract.
- Give a formal notice
The aggrieved party has to, upon becoming aware of repudiation, give a written notice to the defaulting party, clearly stating to them of termination of the contract due to their anticipatory breach.
If you are unsure at this point in time, get a second opinion as wrongful termination can become very costly.
Breaking Up Is Expensive: Chasing Damages After Contract Failures
Once the contract is terminated, both parties to the contract are not obligated to perform anymore, whether there are obligations they have not performed as yet. The defaulting party now has to pay damages to the aggrieved party in order to compensate for the losses that was caused by the breach of the contract. Ultimately, the goal of these claimed damages is to put the aggrieved party in the same financial position they would have been if the contract had been properly completed. In other words, claiming the monetary effect of what it is costing the aggrieved party to employ someone else to complete the work or service.
In construction, not every plan is set in stone — but knowing your rights can help you avoid getting bulldozed. When the concrete cracks, make sure your legal strategy doesn’t.
