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What is considered breach of contract? And is that the same as contract termination?

New YorkConstruction Contract Design Professional

Hi- I am an interior designer in nyc. I have a client who has decided they are not going to abide by the contract they signed. They don’t want to pay for work to be done. We are at a standstill now for almost a month. At what point is it considered a breach of contract? If they breach the contract is it as if they initiated the termination of the agreement? I’m asking because there is a termination clause that requires them to pay me a cancelation fee if they initiate the termination. To me, they are not abiding by the contract and therefore are not allowing the project to continue forward. Hence they are causing the agreement to terminate. Please let me know your thoughts.

2 replies

Dec 20, 2019

If the contract provisions don't include a timeframe which constitutes abandonment of the contract, it's easy to find yourself at loggerheads with an owner. However, even if there aren't specific timeframes set out which trigger a termination of the contract, that doesn't mean that you're necessarily stuck in limbo forever.

Inaction as termination or breach

For starters, it might be helpful to send a written request to the owner for them to proceed under the contract. At least that way, the ball is in their court and some action is requested. Further, it may also be helpful to notify an owner that their failure to move forward will be construed as a breach and/or termination of the agreement. If the owner knows that they may soon be considered in breach of their contract, they'll likely need to make a decision one way or the other about how to proceed. Or, if they don't respond, that may effectively show their intention is to terminate the agreement, which could justify charging a cancellation fee. As for determining whether another party has materially breached their agreement - that's not always a cut and dry situation. Generally, if it's possible to move forward under an agreement, courts prefer the parties to do that and won't necessarily deem inaction as a material breach of contract. But, when the owner has obstructed the continuance of the contract and failed to pay what's owed, then that may well be considered a material breach and constitute the termination of the agreement. For more discussion on termination and breach, these resources should be helpful: - Construction Contracts | A Deep Dive on Breach of Contract - How a Termination Clause Works in a Construction Contract - Wrongful Termination | When is Termination Considered Wrongful?

Prematurely winding down a contract isn't always a bad decision

If significant work hasn't begun, it might be easiest to have an owner pay for the services they've been provided, as well as whatever else may be owed under the contract, and part ways. It'd be an uphill battle to force an owner to carry out a contract for services they no longer want - and if a cancellation fee will spur a heated dispute, then negotiating some other cancellation terms may be worthwhile. Contract disputes will often cause headaches, require significant attention and even costs, and can work negatively against reputations (regardless of whether they should impact your reputation). So, when there aren't serious implications or dollar amounts on the line, exploring some sort of agreement or settlement to discontinue work may be worthwhile. Granted, that won't make sense in every situation.

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Jan 7, 2020

Hi Matthew - Original poster here. I've looked back at the contract. There are specific dates in which I had to deliver specifications to the client, and in return they had their own date had to provide approvals. Anything additional was quoted at an hourly rate. The client only approved 4/60 specs. They want additional options, and when a fee proposal was sent the "I'm not paying for that" started. I responded that "when they are ready to proceed per the contract" to let me know I've gotten another message from them wondering when they are going to have the project completed. I want to make it clear to them, either we move forward the way the contract is written, or they wont get services. This is a client I have had since Summer 2018 Thanks

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