We often have customers come to LegalVision saying “I want to break and end a contract”. We’ve all been a position where we’ve signed up for a product or service and later changed our minds. Unfortunately, if you’ve signed 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’t I just walk away?

The first thought you may have is “why can’t I just walk away?”. Unfortunately, this is rarely possible. A contract is not just an agreement between two or more counterparties, it also creates legal obligations. If you break a contract and walk away from your obligations under a legally binding agreement, you will be leaving yourself open to legal action. Your counterparty will be able to sue for breach and potentially recover any losses they may have suffered from your breach by court order.

Don’t lose heart though! Finding a way to break a contract is usually not impossible.

Just Ask!

Before you do anything, why not just talk to your counterparty? We see many situations in which the counterparty is fine with either cancelling the agreement or changing its terms. Sometimes you just need to ask, rather than needing to break a contract you can mutually agree to cancel it. Of course this doesn’t always work- that’s when you need to get legal.

Review the Contract

Your next step is to review the contract you’re looking to get out of. This means you actually need to review it in some detail; a cursory review will not be enough, you need to be thorough. If you want to break a contract you need to put some effort in! The goal is to find a loophole that might get you out of your obligations. Set out a below are a few loopholes that can invalidate a contract:

Fraud: If you buy a product advertised as new, and upon receipt of the product you discover that the product is used, then the contract will be invalid. This is because your counterparty has acted in a fraudulent manner.

Counterparty Breach: Check out your counterparty’s obligations under the contract. If they have breached it in some way then the contract may no longer exist. You are then off the hook.

Gross Unfairness: If a contract is grossly unfair, the courts may determine that the contract is invalid. The circumstances in which this can occur vary widely.

Conclusion

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.

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Lachlan McKnight
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