Termination of the Contract

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Termination of the contract
Termination of the contract

Under common law, a contract of employment may be terminated by: (a) Agreement with notice;
(b) Death of the employer or employee;
(c) Frustration;
(d) Insolvency; or
(e) Breach.
Termination by agreement with notice
The ending of a contract of employment is most often achieved without any breach of its terms. A contract can be terminated at common law by either party giving the notice required by the terms of the contract, or by giving reasonable notice where none is specified in the contract. What is regarded as reasonable notice depend on a number of factors, such as the nature of the work, the method of payment and the custom of the trade. Alternatively, an employer may pay wages in lieu of notice, subject to the protection given to the employees under the Unfair Dismissals Act 1977. Case: Mc Donnell v. Minister for education (1940)

The plaintiff, a lecturer, was employed by the defendant. She was given three months’ notice of termination of her contract of employment upon her marriage. She took an action against the defendant for the wrongful dismissal.

Held: As no notice was specified in the contract of employment, six months was a reasonable period in the cirumstances.

Termination by death of the employer or employee
Death of either the employer or the employee will end the contract, unless there is an express or implied term to the contrary. This will not apply if the person employed by a company, which may have perpetual existence. Any liabilities arising under the contract of employment are not extinguished upon the death of either party. For example, any outstanding remuneration must be paid to the estate of the employee.

Termination by frustration
If either party is incapable of performing their part of the contract due to circumstances beyond their control, it will be terminated by frustration. Illness may be a frustrating event if it renders future performance impossible or fundamentally different from that envisage by the parties when they entered into the contract. A period of imprisonment may also frustrate a contract if employment.

Termination by insolvency
Insolvency or bankruptcy of either party will not automatically terminate the contract of employment, unless it is essential element of the relationship. In practice, however, an employer who becomes insolvent will not be in a position to pay remuneration to their employees. An employee may submit a claim in bankruptcy for remuneration outstanding, and, in the absence of proper notice, a claim for wrongful dismissal. They may also lodge a claim for redundancy payments. An order for compulsory winding-up(liquidation) of a company terminates the contracts of employment of all the employees. However, a voluntary winding-up will not automatically terminate employees’ contracts if the liquidator chooses to carry on the business-unless it is obvious that the company will be unable to fulfil its obligation under the contracts.

Termination by breach
A contract of employment may be ended by breach if the employee resigns without sufficient reason and without notice, or goes on strike or fails to perform the contract and to observe its conditions. It may also be ended by breach if the employer dismisses the employee without notice when the employer has not sufficient justification to do so, or if the employer repudiates some essential term of the contract, e.g. a complete change of duties. Case; Phelan v. Bic (Ireland) Ltd, Biro Bic Ltd, Societe Bic Sa and Tobert Mcdonald (1997) At a meeting of the Board of Directors of the first named defendant, a decision was taken to terminate the contract of employment of the plaintiff, who had held the position of managing director since 1972. The plaintiff refused and offer of two month’s salary in lieu of notice, insisting that his contact provided for a reasonable period of notice in the event of its...
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