To get out of a legal contract, you generally need the other party's consent. There are usually no adverse legal consequences if both parties sign a simple termination agreement confirming that the contract is no longer valid. Occasionally, a contract may be terminated by one person alone, for example, a case in which the other party has failed to meet his obligations in a significant way. You'll need a different legal document depending on the circumstances.
Termination by Mutual Agreement
If both parties agree to end the contract, they can sign a simple termination agreement. This ensures that one party cannot sue the other if she later changes her mind about the cancellation. Prepare a simple agreement by writing the names of the parties. Define the original contract and include termination language that spells out when the contract comes to an end. For example, you might write: "The parties agree that as of [date], the contract shall terminate and shall no longer have any force or effect." Have all parties sign the termination agreement. The contract will end on the date you have specified or the date the termination agreement is signed, whichever is later.
Termination for Convenience
Some contracts can be terminated by one party for any reason by notice. This is known as "termination for convenience." The contract will spell out the notice period, for example, 30 days, and will often define how to provide the termination notice, such as by certified mail or personal delivery. It's important to follow the contract terms when writing the notice, otherwise the notice may be invalid.
Termination for Cause
Other contracts can be terminated "for cause." This happens when there's a serious problem with a major part of the contract, and the problem has been caused by the other party. You can terminate a contract for cause by drafting a notice of termination to the other person in the contract. Be aware that if you give notice to end a contract too soon, or in circumstances in which the contract should not be terminated, then your notice may be invalid and the contract may continue in effect. It's a good idea to get legal advice before you terminate a contract for cause; not every contract can be terminated in this manner. If you try to terminate a contract that doesn't allow you to do so, you'll be in breach, and you could get sued.
Tips for Writing a Termination Notice
To write a notice of termination for cause or convenience, begin with the title "Notice to Terminate Contract." Identify the contract by writing its date and parties. Set out the relevant paragraph under which you are permitted to terminate the contract, if the termination is for convenience, or the reason for the termination if the other person has failed to meet her obligations. State that you are terminating the contract and specify when the contract ends. Sign and date the notice. This creates a record that you notified the other party about the cancellation and the end date.
Writing a valid termination agreement ends the contract, but it does not release you or the other person from any liability that has already accrued. For example, you might owe the other person money under the contract. Unless you specifically agree to cancel the obligation, the other person can sue you for the unpaid debt. If you want to completely "kill" the contract, it's a good idea to include release language in the mutual termination agreement. For example, you could write "The parties release, discharge, acquit and forgive each other for all claims, actions, suits, demands, agreements and liabilities that either party may have against the other." Release language wipes out all past and future obligations, effectively rendering the original contract null and void.
- Some contracts tell you about your right to void and how to void them. Use these guidelines to void and nullify your contract.
- To protect yourself, do not sign a contract before reading and understanding it.
Jayne Thompson earned an LL.B. in Law and Business Administration from the University of Birmingham and an LL.M. in International Law from the University of East London. She practiced in various “Big Law” firms before launching a career as a commercial writer. Her work has appeared on numerous legal blogs including Quittance, Upcounsel and Medical Negligence Experts.