A hospitality management business signed a multi-year contract to run a community club’s bar and kitchen.
Part-way through, the club ended the contract. Then it refused to pay what the contract said it owed.
ezylegal took the club to court for breach of contract. Before trial, the dispute settled and our client recovered $80,000.
At a glance
- Problem: A club ended a hospitality management contract early and refused the payout the contract required.
- Claim against: The club that terminated the contract.
- Legal basis: Breach of contract, relying on the contract’s early termination payout clause, in the District Court.
- Result: $80,000 settlement after mediation, before trial.
A contract with a payout clause
Our client was engaged to manage the club day to day: staff rosters, stock, the kitchen, functions and reporting to the committee.
The contract had a clear term. The club could end it at any time, for any reason, but if it did, it had to pay out the rest of the contract at a set minimum weekly rate.
The club ended it, and didn’t pay
With well over a year still to run, the club terminated the agreement. No payout followed. Our client treated the refusal as a repudiation of the contract.
When our client pressed for payment, the club pushed back hard. It questioned whether the committee members who had signed the contract terms ever had the authority to agree to them.
Can a business enforce a payout clause when a contract ends early?
Often, yes. If a contract says one side must pay a set amount when it ends the agreement early, and that amount is a genuine pre-estimate of what the other side loses, it’s liquidated damages and a court will usually hold them to it. If it’s out of all proportion, it may be struck down as a penalty.
ezylegal filed a claim in the District Court for breach of contract, relying on the payout clause. The case also argued that the committee members had the authority to bind the club, based on how the club had let them run its affairs.
The club defended the claim, pressed for security for costs, and brought in third parties. ezylegal kept the case on track through disclosure and pleadings, and towards trial.
The outcome
The parties went to mediation. Before trial, the dispute settled, and our client recovered $80,000.
If you’re facing something similar
If a client or customer has ended your contract early and won’t pay:
- read the termination and payout clauses closely, and keep a signed copy of every version and annexure
- keep a record of who you dealt with and what they agreed to on the other side’s behalf
- put your demand for payment in writing
- don’t wait. Time limits apply
A business that ends a contract early doesn’t get to skip the bill. A contract lawyer can tell you what you’re owed.