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Many business owners will, at some point, wish to break or end a contract. Usually, this may be a result of signing up for something and later changing your mind. Unfortunately, if you sign a contract, it can be difficult to get out of your obligations. Businesses and individuals do, however, often decide to break a contract. This article sets out the key steps you should take in order to break a contract you no longer want to be a party to.
Can I Just Walk Away?
The first thought you may have is “can I just walk away?”. Unfortunately, this is rarely possible. A contract is not just an agreement between two or more parties. It also creates legal obligations. If you break a contract and walk away from your responsibilities under a legally binding agreement, you will open yourself to legal action. The other party can sue for breach and recover any losses they may have suffered by court order.
Let us explore some alternative methods to end a contract below.
Just Ask
Your first option should be speaking to the other party. They will often be fine with cancelling the agreement or changing its terms. Accordingly, you can both mutually agree to end the contract.
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Review the Contract
Assuming the other party refuses to end the agreement, your next step is to review the contract details carefully. A cursory review will not be enough, you must be thorough. The goal is to find a loophole that might get you out of your obligations. There are several loopholes that can invalidate a contract.
Fraud
Suppose you buy a product advertised as new. However, upon receipt of the product, you discover that someone else has already used it. Accordingly, this will invalidate the contract. This is because the other party has acted in a fraudulent manner.
Other Party’s Breach
Check out the other party’s obligations under the contract. If they have breached it in some way then the contract may no longer exist. Consequently, you may not need to uphold your own contractual obligations.
Gross Unfairness
If a contract is grossly unfair, the courts may determine that the contract is invalid. This is where legal advice will help. The Australian Consumer Law may also apply if the original term or termination is unreasonable. The circumstances in which this can occur vary widely.
Key Takeaways
Contracts are serious documents. In order to break a contract, you need to put in the time and effort to review the document. If the contract involves a reasonable sum of money, you should then get in touch with a lawyer to go through your options. The main steps in ending a contract are to:
- review the key terms in the contract, particularly under termination and cancellation headings;
- avoid abandoning the agreement and talk to the other party instead; and
- check if there is potential to amend and vary the contract by agreement with the other party.
If you need help with ending a contract, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Fraud in the contract sense involves a statement in the contract that turns out to be either false, misleading or a misrepresentation. Where there is evidence of fraud you may be able to end the contract, seek damages or potentially both.
If both parties mutually agree to end their contact, then the agreement will come to an end and both parties will be free of their obligations and responsibilities.
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