Terminating a contract prior to the expiration date is always a difficult decision for most corporations, when considering the consequences of early termination, especially when the contract is silent on this issue. In this event, the Kuwaiti courts will look to the Kuwait civil code to determine whether a contract should be terminated and the effect of such termination on the parties.
Under the Kuwait Civil Code, both contracting parties may mutually revoke the contract. I always highly advise clients to seek a mutual termination and negotiate termination terms to avoid litigation, and incur any additional liabilities.
If a client is unable to reach a termination settlement, then the terminating party can make a case for Non-Performance or Breach of Contract
Non-Performance or Material Breach
Under the Kuwait Civil Code, if one of the parties fails to perform its obligations when due, the non-breaching party may serve the breaching party with a notice to cure the breach. If the breaching party fails to cure within the specified period, then the non-breaching party shall proceed with the filing of its court case to ask a court to rescind the contract.
The non-breaching party must document evidence of the non-performance/material breach to support its case. A material breach does not automatically relinquish the parties’ obligations to the other, so the non-breaching party must also be mindful of their obligations owed to the breaching party up to and following termination (if any).