| When one party opposes the termination of the construction contract by the other party, various defenses may be asserted. These include waiver of breach, ratification of breach, failure to timely assert termination right, and substantial completion of contract. Action and inaction by a party can lead to a claim of waiver or ratification of the breach. For example, consider the contractor who has failed to timely complete the construction contract per the performance schedule in the construction contract. By all accounts, this constitutes a material breach and the owner is justified in exercising his termination rights. However, should the owner proceed to make progress payments and allow the contractor to finish construction, he may be deemed to have waived his termination right. Some construction contracts contain an anti-waiver clause precluding this defense. However, as a rule, such clauses are disfavored.
Another defense that can be claimed in the face of an assertion of termination is that the terminating party sat on his rights. Though at one point the party did have the right to terminate the construction contract, if he failed to timely aver such right, his ability to terminate may be lost. Many construction contracts provide for a specified timeframe in which termination can be declared. When a contract does not call for a particular period of time, courts will usually decide the question based on a "reasonable" timeframe considering the facts and circumstances.
Substantial completion by the non-terminating party may also bar termination of the contract. If a party has substantially completed his performance under the contract, it would be inequitable, then, to allow termination and thereby deny such party a recovery on the contract. If a party has substantially performed, but committed a minor breach of the contract, the proper remedy is damages. In construction, substantial completion of the contract signifies the principal or considerable compliance with the project's plans and specifications. Basically, construction has been completed to such a degree that the purpose for the contract has been met. Copyright 2010 LexisNexis, a division of Reed Elsevier Inc. |