How to Dissolve a Contract

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Dissolution by Consent

Parties to contracts can dissolve their agreements by mutual consent. For example, Jane signs a one year contract with Bob for lawn care. Jane decides to move and asks Bob if she can terminate her contract early without penalty. If Bob agrees, they both walk away from their agreement free of legal liability. Or, Bob and Jane may agree, as a term of early termination, that Jane must pay Bob $50 to cover the cost of fertilizer he purchased for her lawn. Contract law generally allows people to freely make and terminate agreements, so long as their actions do not violate law.

Legal Reasons for Dissolution

You may be able to terminate an agreement if it becomes impossible to perform. For example, you contract with a photography studio because you want a specific photographer for your wedding photos. But, the photographer dies, making it impossible for the studio to fulfill the agreement. You likely can terminate your contract with the studio based on impossibility. Typically, you can also terminate agreements if the other side breaches, or fails to perform, their duties. For example, you probably can dissolve your weekly lawn service contract if they only cut your grass once a month. A breach must be material, or significant, to be grounds for dissolution. For example, one week, your lawn service cuts your grass a day late. This small, one-time variation is not likely grounds to dissolve the entire contract. In some cases, a court may need to order contract dissolution to ensure your liability is terminated. An attorney can answer questions about your specific contract issues.

References

About the Author

Maggie Lourdes is a full-time attorney in southeast Michigan. She teaches law at Cleary University in Ann Arbor and online for National University in San Diego. Her writing has been featured in "Realtor Magazine," the N.Y. State Bar's "Health Law Journal," "Oakland County Legal News," "Michigan Probate & Estate Planning Journal," "Eye Spy Magazine" and "Surplus Today" magazine.

Photo Credits

  • Nilanjan Bhattacharya/Hemera/Getty Images