How many ways are there to get out of a contract?

There are a number of different ways that a contract may be brought to an end. Some are more well known and well used than others.

The initial, and debatably, most common way to end a contract is by:

1. Termination:

Contract termination is the process of ending a contract before the obligations within it have been fulfilled by all parties. This means that one or more parties have made the decision to conclude the contract earlier than they had originally agreed when drafting and signing it.

If a contract is terminated, all parties will be freed from their responsibilities and obligations.

Termination can come in different forms. There are typically 4 main ways contracts terminate or can be terminated:

• by performance: this is where one or more parties have completed their contractual obligations and no further action is required. The contract will automatically terminate unless parties agree further obligations.
• by agreement: The parties agree to end the contract by agreement, with another contract
• by breach of contract: a party has failed to perform the terms of a contract (a serious breach not capable of being remedied); this may entitle the other party to terminate the contract
  • A contract may set out a different standard of breach, such as a:
    • “material breach”
    • “fundamental breach”
    • “substantial breach”, or
    • “serious breach”.
• by the law of frustration: the underlying circumstances of contract change, which material alter the performance requirements of the contract
  • The modern test for frustration is outlined in the case of National Carriers v Panalpina (1981). Frustration occurs when:
    • there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulation in the new circumstances.

2. Rescission:

Rescission is when a contract is rendered null and void and is therefore no longer recognised as legally binding. The courts can then free non-liable parties from their agreed obligations.

Some of the factors that may lead to the recission of a contract are:

• Misrepresentation – where a party gives false or misleading information that convinces another party to enter into a contract
• Undue influence – where a party is induced to enter in to a contract other than by own free will or adequate attention to the consequences
• Duress – where a party is forced into entering a contract against own free will.

3. Force majeure:

This is where events outside the control of the parties do not allow them to perform their obligations under the contract. For example, acts of God, other natural disasters or terrorist activity. It is good practice for parties to expressly state the type of events in the contract that will not make the defaulting party liable if they are prevented from performing their obligations as a term in the contract.

4. Illegality:

A dishonest or corrupt act that can render a contract unenforceable.

5. Insolvency :

Where a party becomes insolvent, this can trigger a termination clause under the contract or lead to a repudiatory breach. Be sure to read the small print!

6. Death or change of control:

In the event of change of ownership of a business, merger, or death of a party this can bring a contract to an end.

If you have suffered as a result of a breach of contract; want out of a contract you have entered; or even want help in drafting the correct termination terms in your contract, then our Employment Solicitors for Employees can help. We always check the small print!

In appropriate cases we can act on a no win no fee basis, or by use of other funding arrangements to limit your financial exposure, for instance with contingency fees or insurance backed funding

Call Wilson Browne Solicitors today to see if we can help.