In this article we discuss the dimensions of the concept of termination of contract, the various definitions proposed by the doctrine in various jurisdictions and argue that the modern trend of a more comprehensive concept of termination...
moreIn this article we discuss the dimensions of the concept of termination of contract, the various definitions proposed by the doctrine in various jurisdictions and argue that the modern trend of a more comprehensive concept of termination of contract should be asserted.
Traditionally, termination of contract is analyzed in three different dimensions: (1) a subjective right of a contracting party to declare termination by notice or ask it from a court; (2) the act by which a contracting party triggers termination by notice or legal action in exercise of its subjective rights; and (3) the result of the exercise of its subjective right in respect of the contractual relationship.
In its meaning as a subjective right, termination is in fact a potestative right, whereas it offers the possibility to modify a pre-existing contractual situation and it is normally exercised by way of the unilateral declaration of the will of a person of the party entitled to it.
In the classical theory of French and Romanian legal doctrine, termination is largely seen as a sanction for guilty breach of a synallagmatic contract which consists in its retrospective unwinding. Termination occurs solely in case of guilty breach of obligations, while the unwinding of a contract, due to impossibility, does not fall under termination.
Modern European doctrine analyzed by the author accepts today that termination is an objective remedy for the breach of obligations, independent of the motives that stood behind it and regardless of fault. Additionally, oftentimes this remedy would be granted even without any breach, in particular in cases of a termination right reserved by contract.
The author concludes that termination is a functional institution; in each separate case it leads to the ending of the contractual relationship and, in most cases – a liquidation relationship. The grounds for termination and the form in which termination occurs are varied.
Most often a scholar would define termination through the lens of one of the legal grounds for termination. Such a definition would not however be suitable in respect of some other legal grounds of termination. Contracts can fail in too many ways. Moreover, termination may intervene without any failure, but simply at a party's discretion where the law or contract allows this explicitly.
Whereas we find it useful to develop, in the long run, a general theory of termination, we would support that part of the modern legal doctrine which determines termination as a functional legal institution, id est as an instrument of ending of contractual relationships and the liquidation of a contractual relationship, usually because of some failure or pathogenesis.
A beginning of such a general theory of termination is the adoption of set of norms under so-called restitution law, as already done by the new Romanian Civil, the Catala Avantprojet of amendments to the French Civil Code, and the Draft Common Frame of Reference.
Regardless of the legal ground for unwinding of a contractual relationship, the said relationship will be liquidated according to the rules of restitution.
Due to this reasoning, the author did not seek to identify a correct and final definition of termination of contract. With this proviso in mind, we support that termination is a legal technique of extinguishment of non-performed contractual obligations at the initiative of a party, relying on a statutory or contractual right, and, in case there are past performances in which the terminating no longer holds an interest, such extinguishment will be followed by bilateral restitution of past performances.