Essential law: Termination, part three

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As part of our essential law series, Sara Cunningham discusses how a right to terminate can be lost

Termination after repudiatory breach of contract is not automatic. A party with a right to terminate has a choice to end the contract or not. Once the choice is communicated, it cannot be undone.

Affirmation

Affirmation is communicating an intention to continue with a contract. A party with a right to terminate for repudiatory breach can affirm the contract (keep it alive and waive the right to terminate), either expressly or as implied by its actions. For example, continued performance of the contract by the innocent party and requiring the defaulting party to continue with its obligations may constitute affirmation.

However, a party cannot affirm a contract following a repudiatory breach unless it has a full understanding of the facts that have led to the repudiatory breach and is aware of the right it has to choose between accepting the termination or affirming the contract.

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