united-kingdom contract-law
Can some clauses of a contract be enforced when there is a breach of contract (caused by non-payment)?
<p>My company, based in the U.K., had a software development contract with another company, also based in the U.K.</p>

<p>The contract was mostly standard, as far as I could tell when comparing it to other contracts I have worked with.</p>

<p>I would work for a daily rate of £n/day, invoiced monthly and then paid within 30 days of invoice. There would also be some other clauses relating to such things as, for example, after termination, my company cannot provide services to any major competitor of the other company for a period of 6 months, poach existing employees, or share confidential information.</p>

<p>Unfortunately, after submitting an invoice in April for works in February and March, the other company failed to make payment after giving multiple assurances that it would be paid, then suddenly raising issues at the end of June for works in March, and making demands and other unfortunate behaviours.</p>

<p>After minor legal action, all invoices owed have now been paid, a total of 80 days after the initial invoice was submitted (50 days overdue).</p>

<p>My question is: can the other company enforce any other clauses, such as restrictions for 6 months after termination to work for other companies, not approaching company employees for other work, etc as outlined in the initial contract? Does non-payment and the legal action so far constitute a breach of contract that makes the rest unenforceable?</p>

<p>I appreciate the answer <em>may</em> be "it depends" and is not legal advice, but comments would be useful. Thanks.</p>

<h2>All clauses can be enforced</h2>

<p>Breach of contract by party A does not allow the party B (or C or D etc.) to breach. Or, for that matter allow further breaches by party A.</p>

<p>The remedy for a breach of contract is damages, not relief of obligations.</p>

<p>So, even while your client was not paying you, you were still obliged to perform your obligations under the contract.</p>

<h2>Termination</h2>

<p>A sufficiently egregious breach may allow the aggrieved party to legally terminate the contract which ends all future obligations. However, termination is highly technical and easy to get wrong - if you purport to terminate a contract when you do not legally have the right to do so then you have just breached the contract and exposed yourself to damages.</p>

<p>Failure to pay on time is generally not a breach that allows termination. Your legally correct course of action is to sue for the money and continue to fulfill your legal obligations under the contract. Its worth noting that the legally correct actions may be commercial suicide and the correct commercial decision may be to breach the contract.</p>
