Sigma Limited is a telecommunications company. It has a General Condition of Contract on which it buys goods from its vendors. The GCC has the following termination clause:

Termination:

1. Termination for breach: The Buyer (Sigma Limited) can terminate the contract for breach of followings:

a. Delay in delivery of goods by the seller

b. The supplied goods not matching the contracted description.

c. The seller not furnishing on time a proper bank guarantee.

2. Termination for convenience: The buyer can terminate the contract at any point of time for his convenience.

Sigma Limited entered into a contract on the above GCC with a seller to supply routers. The supplied routers matched the description given in the contract. The routers, however, were defective. The routers would work sporadically making them useless. The buyer wrote to the seller: 'We have been supplied routers which are defective. The routers work sporadically and are of no use to us. Following this, we terminate the contract and would claim damages for the breach.'

The seller responded: 'After examination, we recognize that the routers are defective. We undertake to repair the routers and make them defect free. Within the terms of the contract, you do not have the right to terminate the contract. The remedy of termination is not available to you.' The buyer responded: 'We have terminated the contract by our earlier letter and would claim damages.' The parties are in dispute on the validity of termination by the buyer.

a. The seller has supplied defective goods and breached a condition of the contract. The breach is a repudiatory breach and the law gives the right to the party to terminate the contract. Contract terms cannot take away or dilute the right. Irrespective of the contract terms, the buyer can terminate the contract.

b. If a contract has a termination clause, the breaches covered under it become a condition to the contract. Any breach of the term, listed under the clause, becomes a repudiatory breach. Correspondingly, all other breaches are taken to be non-repudiatory. The buyer does not have the right to terminate the contract.

c. The router being defective is a core central part of the contract. A party has the right to terminate the contract for a breach going to the root of the contract unless the contract clearly ousts the right. The buyer has the right to terminate the contract.

d. The termination clause specifies the breaches for which the buyer can terminate the contract. The goods being defective is not included as a ground for termination. The buyer can claim damages but not terminate the contract.