Legal Definitions - right to terminate

Definition: The right to terminate a contract when the other party breaches a duty that arises under the contract. This is a remedy that is given to a party to a contract.

The right to terminate is different from the right to rescind. The right to rescind is when the other party breaches a duty that arises independently of the contract.

Examples:

• If a company hires a contractor to build a house, and the contractor fails to complete the work on time, the company may have the right to terminate the contract.
• If a person buys a car from a dealership, and the car turns out to be defective, the person may have the right to rescind the contract and get their money back.

The first example illustrates the right to terminate because the company can end the contract with the contractor due to their breach of duty. The second example illustrates the right to rescind because the person can cancel the contract and get their money back due to the dealership's breach of duty.