As business owners and professionals are well aware, contract law is a complex topic. One of the more nuanced rules is the tender back rule, which takes a bit of digging to properly understand.
The tender back rule essentially involves the outcome of a breach of contract. When a party cannot uphold its contractual obligations, it must “tender back” everything that it has received from the other party, as if the contract had never existed. This is due to the idea that if the contract had not been broken, the return would never have been necessary.
Tender Back Rule Scenarios
The tender back rule is difficult to understand without concrete examples:
1. Say a construction company contracts with an electronics business to buy materials in the course of an ongoing project. The construction firm is unable to pay the agreed price and therefore breaches the contract. Under the tender back rule, the construction firm must return all the goods received from the electronics business, undoing the transactions that occurred between both parties.
2. A retail store agrees to pay another business $200 to rent a table for a day. After the day has passed, the retail store fails to uphold this agreement and must “tender back” the money. That is, they must return the $200 even though they have not used the table.
The Tender Back Rule: Conclusion
The tender back rule is an important facet of contract law that ensures two parties remain loyal to the agreements they make until the very end. If one side fails to uphold their end of the bargain, they must return whatever they have received, just like they had never made the contract in the first place. It allows for a predetermined outcome when contracts are broken and is a vital part of our contract law system.