HOW TO GET OUT OF A BAD CONTRACT WITHOUT BEING SUED
It is not unusual to experience some dissatisfaction with a contract after signing it. People seldom get everything they want, but sometimes they inadvertently agree to something that’s bad for business. Most of the time, you cannot do anything about it after the fact. Contracts are legal documents and give the parties the right to enforce their terms. One side cannot just decide not to honor it unless they want to get sued. As such, you must understand what you are agreeing to and have a lawyer advise you of the consequences before you sign. Notwithstanding this, there are times when you can get out of a bad contract.
- CONTRACT ALLOWS TERMINATION. Many contracts allow a party to terminate provided they follow certain procedures, such as giving advance written notice or paying a penalty.
- MATERIAL BREACH BY THE OTHER PARTY. If the other party has failed to perform and it is a material breach, you may have grounds for termination. However, carefully document all instances of noncompliance with the contract by the other party and make sure to follow any contract provisions related to breach, such as providing a certain amount of written notice and an opportunity to cure.
- GROSSLY UNFAIR TERMS. An unconscionable contract that is so unfair so as to “shock the conscious” may not be enforced by a Court. Typically, these contracts are extremely one-sided and between parties who have vastly different bargaining power.
- FRAUD, MISREPRESENTATION, OR MISTAKE. Serious misconduct by the other party, such as fraud or misrepresentation, is grounds to terminate. Similarly, if there was a mistake in the contract, you may be able to cancel or reform the contract. Examples include mistakes as to quantity, price, dates, descriptions, etc.
- IMPOSSIBILITY OF PERFORMANCE. If you cannot meet your obligations under the contract because of some unforeseen intervening circumstance outside of your control, you may be able to get out of the contract. Examples of this include if you or an essential party died or was incapacitated, your facility burned down, an Act of God delayed performance, etc.
- NEGOTIATE. While the above options provide legal solutions, you should also consider business remedies. The other party may be willing to agree to termination or negotiate changes to the contract in exchange for other benefits, particularly if you have a long-standing and otherwise good relationship.
Before you give up and decide you’re stuck with a bad contract, talk to an attorney about your options for changing or terminating the agreement.
If you need assistance with a contract or transaction, contact us for a consultation to find out how we can help.