How To Get Out of a Contract

Apr 1, 2016
Reading Time: 3 minutes
Written by William Vu

You’ve sat down, sorted out all the nitty-gritty with lawyers and your contract has been working well. However, after a short time, the circumstances change and you feel like it’s time to part ways. It need not end in tears and a lengthy court case, so here are some of the ways that will let you get out of a contract.

Just ask

Whilst contracts can reflect commercial intention, it is also based on personal and business relationships – before you get bogged down in the legal back and forth, it might be worth trying to reach a mutual resolution with the other party.

Explain why you wish to leave the contract and it is possible that they will let you off – in that case, they will need to draft a deed (a formal contract where there’s no consideration, such as payments) saying that the contract is terminated.

You could also create a new contract that will provide terms that allow you to terminate in the future or immediately terminates the original contract. This can either be in the form of a deed or you can provide fresh consideration, such as paying to be discharged from your own obligations.

Find an avenue

Although contracts are designed to be honoured and enforced, there are circumstances that may give you a right to terminate:

From the terms of the contract

Your contract may include a term that states the circumstances that give you the option to terminate, such as giving you the right not to accept goods if they are late or if a certain event occurs. This is likely the most straight-forward way to leave the contract.

For breach

This occurs when the other party or parties have failed to perform their obligations at the time specified in the contract or to a required standard. Certain breaches of terms are not grounds for termination – for example, a breach of a warranty, which is not essential to the contract.

For repudiation

If it appears that the other party or parties are no longer willing or able to perform what was promised in the contract, you may have the right to terminate. For example, it could be that you have a supplier agreement with a liquor store and they have failed to renew their alcohol supply licence or are in significant debt and are unlikely to be able to make deliveries in the future.

Fraud or misrepresentation

If you believe the contract was formed on fraudulent grounds, such as a dishonest use of power to gain advantage, or you were misrepresented as to its effect, you can also seek to terminate the contract.

Communicate your intentions

A termination or an agreement to terminate can be done orally, however it is usually better to put things in writing. Make it clear the reasons why you believe you have the right to terminate and that you are exercising that right.

It is recommended that you seek the assistance of a contract lawyer before proceeding with any of the avenues listed above.

If you feel like you’ve been wronged or it is simply time to bring things to an end, there are options for you. This article has summarised some of the paths and reasons you can use to be able to get out of a contract. It might become complex but with a good lawyer and attention to detail things can work to your favour.

Unsure where to start? Contact a LawPath consultant on 1800 529 728 to learn more about reviewing your contract and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

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