You may want to terminate your contract for several reasons. Whilst unfortunate, it’s a fairly common occurrence. However, before one can terminate a contract there must be sufficient cause to do so. Below, we break down the causes behind why you can terminate a contract, before explaining how you can do so.
Causes of contract termination
Mutual agreement
Arguably the easiest cause of contract termination is by mutual agreement from all the parties involved in the contract. This can be for a range of reasons, but generally it revolves around the contract not working out for some reason. It involves the parties releasing each other from the obligations before its completion.
Contract performance
Once each party in the contract has completed their obligations as outlined, the contract terminates. The contract comes to an end, and without provisions outlining that it continues past this time, it’s no longer enforceable. In certain cases, courts have recognised partial work completion as fulfilling the contract if extenuating circumstances apply.
Breach of conditions
A breach of a term can give rise to contract termination. This may occur in form of refusing to perform work, completing the work incorrectly or at an incorrect time, or a breach of confidence. In this situation, the party that has been wronged may not be required to fulfil their obligations and the contract may be terminated.
Frustration
Occasionally, unanticipated events or circumstances occur that mean that a party is no longer able to fulfil their obligation. Frustration will release the party from their obligations, if they can prove that the event was not foreseeable nor caused by either party.
Illegality
A contract is automatically terminated if the conditions of the contract are illegal. For example, a contract on trafficking drugs is automatically terminated. It’s impossible to enforce a contract in the courts if the content in the contract is illegal, as you’ll just be admitting to the courts that you’re a criminal.
Terminating the contract
Once you’ve established sufficient cause to terminate the contract, the final step is to actually terminate it. Simply seeing that your contract can be terminated doesn’t mean that it is. There are two types of breaches that may terminate the contract.
Actual breach
This occurs when an essential obligation under the contract isn’t satisfied. The non-breaching party can request damages or termination of the contract, depending on their needs. The breaching party may bring the issue before the court if issues arise with the termination.
Anticipatory breach
This occurs where one party indicates that they will breach the condition of the contract. This may be due to a variety of reasons. However, what matters is that the party is either unable or unwilling to fulfil the terms. It is then up to the other party to renegotiate the terms of the contract or to terminate the contract.
Final thoughts
There are several different reasons as to why a contract may be terminated. Essentially, it comes down to whether the conditions of the contract are fulfilled as agreed. For further enquiries or questions about terminating a contract, a contract lawyer may be of assistance.
