6 FAQs About Expired Contracts

Last updated on May 9, 2024

Expired stamp on contract document

A contract is an agreement between two parties. It could be for the provision of goods or the provision of services. It could be for an indefinite amount of time, or for a specific period of time. When this specific period of time expires, both parties may find themselves in a situation where this contract has now expired. In such a case, what happens if you continue performing your obligations and are unaware that the contract has expired?

This article will explain:

  1. What is an expired contract?
  2. How might a contract expire?
  3. What can parties do when a contract expires?
  4. What happens if you continue performing your obligations under the expired contract? How will a court decide?
  5. Can you breach an “expired” contract?
  6. Can you breach a clause in an expired contract?

1. What is an Expired Contract?

As its name suggests, an expired contract means a contract which has ended, concluded or been terminated on its intended expiry date.

There may be some contracts or agreements, possibly suggestive of a long collaborative relationship, which may provide for auto-renewal for a fixed number of times.

However, generally, contracts do not get automatically renewed or extended.

2. How Might a Contract Expire? 

This would largely depend on how and why it was formed.

Contracts can be formed for many reasons and purposes. Some contracts are formed for the purposes of providing services, for example, a contract for renovation services. You may expect such contracts to possibly end by a specific end date or once a fixed period is over (i.e. a fixed-term contract).

Otherwise, contracts may be entered into on a project basis (the same example of a contract for renovation services applies here as well) which means the contract is terminated or expires once the obligations of both parties (i.e. a homeowner who pays for the services and the contractor who provides the renovation services) are performed.

3. What Can Parties Do When a Contract Expires? 

If the parties to the contract are aware that the contract has ended, then the position is clear. They can choose to do any of the following:

  • Extend the contract;
  • Enter into a new arrangement; or
  • Allow the contract to be terminated.

Fixed-term contracts are relatively straightforward. Once the term ends, the contract is automatically terminated as of that date.

However, what if parties simply continue with their obligations? They may be unaware that the contract has expired. What, then, happens to this expired contract and the contractual relationship?

4. What Happens If You Continue Performing Your Obligations Under the Expired Contract? How Will a Court Decide? 

The first rule in contractual interpretation is to determine and give effect to the intention of parties as objectively determined. To do so, the first step is to look at the text of the contract (i.e. the contractual terms). The court may then consider the relevant context of the contract.

That said, if the contract is in writing, and parties have made it clear for the written contract to contain all the terms of the agreement, then no other evidence, even evidence of any oral agreement or statement, will be admitted for the purpose of varying or amending the terms of the written contract.

If, however, the relevant context of the contract is clear and obvious, then yes, the court may take this into account. We may see this in the context of separate oral communications between the parties, such as correspondence between parties discussing the continuation of the original contract or varying of the terms. If the parties have communicated or acted, with proper record-keeping, in a way which would suggest an extension of the contract, then the court may take this into account.

Depending on such contextual evidence, the court may determine that:

  • The contract has continued between the parties on the same terms, or even on varied terms;
  • The parties have now entered into a new contract; or
  • The contract has simply ended or expired.

To illustrate, you may have entered into a fixed-term contract with an employer. This could be your usual employment contract but only for a fixed period of, say, 2 years. We see this often as employment contracts with governmental bodies.

However, due to inadequate monitoring (e.g., you failed to remember or notice the expiry date which may not be unusual especially if the expiry date is years away), you may have continued your obligations with this employer despite the expiry of the contract. Whether or not you still have an existing employment contract will depend on both your employer’s and your actions:

  • If both parties continue performing their obligations as usual, i.e. you continue your work and the employer continues paying you, then this might suggest or imply that both parties had intended to continue the contract on the same terms.
  • If you had raised a dispute with the employer regarding certain terms in your employment contract relating to your salary, but continued working as per usual, whether or not a new contract has been formed may depend on your discussions with your employer regarding the disputed terms. If the employer has not responded to your queries, but you continued working as per normal, then an objective test might regard that you had nevertheless intended for the contract to proceed on the same terms. Similarly, if you had raised the dispute, but had halted work or even delayed work, then beyond the expiry of the contract, the court may hold that you had not intended any extension of the new contract, or even a new contract on new terms.

Considering the above, it is definitely prudent to monitor the terms of your contract, especially if it is a fixed-term contract. Close to the end date, you should remind the other party of the contract’s impending expiry, and take appropriate actions to determine if the contract should or can be extended in any way.

If you wish to extend the contract or vary any terms, then you should be proactively seeking to do so either by entering into a new contract, or executing a variation agreement. A variation agreement, as its name suggests, seeks to vary or amend the terms of the original agreement.

5. Can You Breach an “Expired” Contract? 

It is important to consider whether a contract has expired or otherwise, so you are kept clear of your obligations under the contract. A breach of contract may occur if:

  • Performance is late, e.g. you fail to complete the renovation by the agreed date;
  • There is no performance, e.g. you were in a contract to deliver goods to the other party, and the goods were never delivered;
  • Performance is defective, e.g. you were in a contract to provide goods, and the goods are defective and cannot be utilised as intended by the other party;
  • One party has done something which is expressly disallowed in the contract; or
  • One party has by his or her own action prevented himself or herself from fulfilling the contractual obligation.

As mentioned, if the parties continue to perform their obligations as if the contract had not ended, then an objective test may determine that the contract is still valid. If so, then your obligations under the contract would still be valid.

On the other hand, if the contract has indeed expired and you no longer perform your obligations, then it might be hard for the other party to argue for compensation based on this “breach”.

If you have in fact breached a contract, you may be liable for damages. The other party may also choose to terminate the contract or to insist on specific performance of the contract.

To understand more about contract damages, you may refer to this article on the types of damages that might be recoverable from a breach of contract.

6. Can You Breach a Clause in an Expired Contract?

Yes, there are clauses in a contract which can survive its termination or expiry – for example, confidentiality and liability clauses. These clauses are not likely to expire or would be drafted so as to survive the expiry of the contract because they seek to either protect the confidentiality of important information shared during the course of the agreement or ensure that liability arising from any wrongdoing does not get absolved just because the contract expires.

Whether or not a confidentiality clause has expired should be set out in clear terms in the contract. Typically, confidentiality clauses, especially in non-disclosure agreements, will not expire. In this case, you would have to take care not to breach these clauses even if the contract itself has expired.

Practical Tips

To avoid being in a situation where you are unsure of your position vis-à-vis an expired contract, here are some practical tips that you can take note of:

  • Have a contract management system or reminder/diary system in place or set up appropriate reminders to remember contract expiry dates. Alerts may be programmed at appropriate intervals to discuss possible negotiations for extension or renewal of the contracts. In monitoring these deadlines, you would also be wary or careful of any suggested confirmation of any extension of the original contractual terms whether verbally or via actions, for example, continuing to provide the intended services.
  • If the contract is not for a fixed-term, then employers should monitor performance obligations of their employees against the agreed terms. This can help you determine which contracts are worth extending or renewing.

Lastly, it is important to be aware of the consequences of performing under an expired contract. For example, if you continue working and providing services as an employee, then the employer may allege that you were working without authorisation. You may be liable for trespassing on the company’s premises, or for fraudulently holding yourself out as an authorised employee.

If you are unsure of your position vis-à-vis an expired contract, it would be best to seek further guidance or advice from a contract lawyer to help determine your rights and continued obligations, if any.

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