Q&As

If a contracting party enters administration, does this impact the ability of the other contracting party to exercise its right of termination under the contract in such circumstances?

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Published on LexisPSL on 18/05/2018

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • If a contracting party enters administration, does this impact the ability of the other contracting party to exercise its right of termination under the contract in such circumstances?
  • Express termination rights in the contract
  • Trading with a company in administration

If a contracting party enters administration, does this impact the ability of the other contracting party to exercise its right of termination under the contract in such circumstances?

For the purposes of this Q&A, the contract is a business to business contract which is not subject to specific industry or sector regulation.

Express termination rights in the contract

You may firstly wish to consider the express and implied terms of the contract with regards to termination. In particular, consider whether the terms of the contract provide that the occurrence of administration is an automatic trigger event resulting in immediate termination of the contract or whether it is provided that the non-defaulting party has the right (but not necessarily the obligation) to terminate, or to terminate within a given period of time of such occurrence. See Precedent: Termination clause for example drafting and explanatory notes.

From there it can be assessed if the contract has in any event terminated, or whether the non-defaulting party wishes to exercise its right to terminate the contract or instead if it wishes to continue to trade under

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