How to Handle Contract Repudiation in Business Agreements
What is contract repudiation and how does it affect business agreements?
Choose the correct answer:
a. Contract repudiation releases the non-breaching party from its duty to perform under the contract.
b. Contract repudiation requires both parties to fulfill their obligations under the contract.
Answer:
a. Contract repudiation releases the non-breaching party from its duty to perform under the contract.
Explanation:
In business agreements, contract repudiation occurs when one party indicates that they will not fulfill their obligations under the contract. This action releases the non-breaching party from their duty to perform under the contract. When a party repudiates a contract, it essentially breaches the agreement, giving the other party legal grounds to terminate the contract and refuse further performance.
Contract law allows the non-breaching party to treat the contract as terminated and refuse any further obligations once the other party repudiates the agreement. This principle protects businesses from being forced to perform under contracts that have been breached by the other party.