How can I get out of a contract?

Two people discussing a contract

Contracts play an important role in governing our society. From business deals to real estate sales to signing up for a new gym, you’re going to encounter a variety of contracts for a variety of purposes. But what happens when your circumstances change and you no longer wish to be under a contract? In this article, we’re going to explore some options you may have for getting out of a contract.

Negotiate a Change or Cancellation

When you are looking to end a contract early or cancel it, you should start by negotiating with the other party. Share why you cannot proceed with the contract and offer a consideration for cancelling. In some cases, this may look like a cancellation fee. In other cases, it may look like exchanging less services or products than what was originally agreed upon. No matter the case, mutual agreement to cancel the contract is often the most amicable way to end it. If you reach an agreement, make sure to have the other party sign a document stating the terms of your cancellation so you are both protected from any future legal action.

Express Right to Terminate

Some contracts will include a clause called an express right to terminate. This clause allows one or both parties to terminate a contract if specific criteria are met. In some cases, this may include failure to perform under the contract, breaching the contract, or engaging in behavior that could harm the other party. If you have a contract with the express right to terminate, pay attention to the requirements set forth by the clause. You may need to send a notice that you are cancelling the contract, and you may need to provide documentation to prove you meet the criteria.

Cooling-off or Cancellation Periods

Some contracts include a cancellation or cooling-off period (sometimes called a rescission clause). These are most common in consumer transactions. A cancellation period is a period of time in which you can change your mind and cancel the contract. Cancellation periods are usually around 30 days, though this can vary. If you choose to cancel a contract in this way, take note of the time frame and any other requirements. You may be required to give notice of your cancellation to the other party or parties involved.

Inability to Perform

If you are unable to perform under a contract due to circumstances outside of your control, you may have the right to terminate it. For this to apply, you typically must have an accident of some kind, sustain an injury, or suffer from an act of nature (a storm, tornado, etc.).

On the flip side, you may be able to end a contract if the other party has failed to perform. This is sometimes referred to as the “failure of condition precedent.” To cancel a contract in this way, you must terminate it before the other party upholds their end of the contract.

Mutual Mistake

A mutual mistake can void a contract, thereby terminating it. A mutual mistake happens when both parties enter a contract with miscommunicated or incorrect details. Here is an example of mutual mistake. Party A agrees to sell a cow to Party B. Party A believes the cow cannot produce milk, so Party A gives Party B a discount. After Party B has purchased the cow and taken it home, Party B discovers the cow is capable of producing milk. The contract between Parties A and B could then be voided because neither party knew the details to which they were agreeing.

Breaching a Contract

Some contracts (primarily consumer contracts) dissolve if one party breaches it. While this can be a way to end a contract, it often carries consequences. You may be required to attend arbitration and/or offer a monetary settlement. You may also be susceptible to further legal action. Before choosing to breach a contract, you should speak with an experienced business law attorney to discuss your options.

Voiding Factors

Certain factors exist that legally void contracts. You may be able to end a contract if any of the following are present.

  • Lack of Capacity to Enter a Contract—If you lack the capacity to understand a contract, you cannot be legally bound by one. This applies to cases of age, mental incapacity, and in some cases intoxication.
  • Duress—If you have been threatened or coerced into signing a contract, you may have grounds to rescind or void it.
  • Undue Influence—Similar to duress, if the other party exerts excessive influence over you, takes advantage of your trust, or exploits a vulnerability that you have, you be able to void the contract.
  • Misrepresentation—If the other party misrepresents the terms of the contract through fraud, false statements, or concealing facts, you may be able to void it.
  • Statute of Frauds—This statute requires certain types of contracts to be made in writing. If they are not made in writing, the contract is void. An acronym you can use to remember which contracts this applies to is: MY LEGS.
    • Marriage—This refers to marital agreements (prenuptials, settlements, etc.).
    • Year—This refers to contracts that cannot be completed within one year.
    • Land—This refers to contracts for the sale or transfer of land.
    • Executor/Estate—This refers to contracts in which an executor agrees to cover certain debts from an estate.
    • Goods over $500—This refers to contracts that handle a sale of goods worth more than $500.
    • Suretyships—This refers to contracts in which someone promises to act as a surety or guarantor.
  • Illegality—Contracts that involve illegal activities or that violate public policy are generally unenforceable and voidable.
  • Unconscionability—This refers to contracts that are so one-sided or oppressive that they are considered shocking or fundamentally unfair. An example of this might be a furniture rental company increasing interest by 40% if payment is made one day late. Courts may refuse to enforce unconscionable contracts or may strike down unfair terms.

Contact Cornerstone Law Firm for help.

Contracts can be confusing, and the terms can be hard to understand. If you need help getting out of a contract, contact the attorneys at Cornerstone Law Firm.