When Is a Cancelled Contract a Breach of Contract?

A contract can end in a variety of ways. The goal is for a contract to end based on the agreed upon terms, with everyone completing their part as established by the agreement.

Sometimes contracts have clauses that allow for the preemptive cancellation of the agreement under specific circumstances. Usually this only occurs when one party knows that they will only be able to complete the contract terms under certain conditions.

For example, when trying to purchase a house, there is usually a clause that allows the buyer to cancel the contract if they cannot get a loan from a bank. The buyers will have lost any money put into the deal up until that point, but they will not be on the hook for a home without a way to pay for it. And the sellers benefit because they get to keep any upfront money as a sort of payment for the time they could have spent looking for another buyer. While the contract was not completed, a breach of contract does not occur in this case, because a possible early termination was agreed upon.

When a contract ends due to a breach of contract, it often needs to be settled by a third party either via mediation, arbitration or litigation. A breach of contract occurs when one party does not adhere to the agreed upon terms of the contract and usually causes a disadvantage to another party to the contract. However, it is not always clear who is at fault when a breach of contract occurs.

For example, as explained in a recent Huffington Post story, musician Taylor Swift is currently being sued for breach of performance contract by the company which handled the tickets for her show. She was scheduled to perform at a music festival and was paid for her services before the concert date. However, Ms. Swift did not perform at the concert and did not reschedule her performance; she kept her payment for the cancelled performance. Ticket costs were refunded to customers but the ticket company believes that Ms. Swift should at least cover the costs of the refunded tickets.

It is unclear whether Ms. Swift will be found at fault, because her performance was cancelled due to the organizers cancelling the entire festival, including her performance--something she had no control over. Because she was willing and able to perform, a court most likely will find that she did not breach her contract. Therefore, whether Ms. Swift may keep her entire payment will be based on the contract language. While most contracts have a clause regarding failed performance, since it was not Ms. Swift’s fault, she may still keep a percentage of the payment because she made herself available and turned down other opportunities for the music festival.

This case could also end in favor of Ms. Swift because she did not have a contract with the ticket company--she had a contract with the concert organizers. Therefore, even if Ms. Swift is required to give back some money it would most likely go to the organizers, who paid her, not the ticket company.

As this high-profile example suggests, litigation of these contractual disputes can be quite complicated, having an experienced attorney on your side can make all the difference. If you have any sort of contract issue in our area, be sure to reach out to our Long Island business lawyer for guidance.

See Related Blog Posts:
Television Reporter Sues for Breach of Contract
Piercing the Corporate Veil in Breach of Contract