Both parties agree to cancel a contract results in the terms and conditions of the contract becoming null and void, upon mutual consent of both (or, all) parties involved. With that said, even though all involved parties may agree to cancel the contract, there may exist stipulations that have to still be met. Additionally, it is worth noting that only the parties who entered into the contract may make the decision to cancel it.

What is a Contract?

A contract is a legally-binding document that has been agreed upon by all the parties involved, either via written or oral consent. Generally, there are activities that must be completed by either one or all parties before a contract is considered to have been completed.

Impossibility of Performance

Perfomance, within the context of a contract, applies to the duties that have to be carried out in accordance with the terms and conditions spelled-out. For example, you may hire a painter to come and paint your house. Once the painter has painted the rooms or areas that he was hired to do, that is considered performance.

However, if for some reason, the painter is unable to do, or complete, the job for which he was hired, then it is known as impossibility of performance. At this point, you have the right to terminate the contract. Additionally, depending upon the circumstances, you may be within your right to pursue damages for breach of contract.

Breach of Contract

Breach of contract occurs when one of the parties, with whom written or oral consent is given, and who is involved in the contract, intentionally does not fulfill their end of the agreement. A breach of contract can occur either as a result of none of the terms and conditions having been met, or as a result of only a partial job having been done. As such, there are different classifications of a breach of contract:

  • Material breach, which allows for the injured party (for example, the homeowner in the aforementioned example) to seek damages.
  • Immaterial breach, which does not allow for the injured party to seek monetary damages.

A material breach essentially creates hardship for the injured party. For example, if the previously mentioned housepainter either never shows up to complete the job for which they were hired, or if they do a subpar job, causing you to then have to hire someone else to fix it, then that could be seen as a material breach. Meanwhile, if the house painter completed the job and did so sufficiently, but was a day or two late in completing the job, then that may be seen as an immaterial breach.

Prior Agreement

Some contracts allow for a prior agreement between the involved parties, to terminate a contract, for specific reasons. However, the contract must specifically spell-out what the reasons may be for the parties to agree to cancel the contract, and both parties must agree on those reasons, upon signing the contract. For example, if you want your house painted a specific color, bought at a specific price, you and the house painter may put a provision in your contract that if he cannot find that paint color, or cannot find it at the price you are expecting, then you can mutually agree to cancel the contract.

Additionally, the contract should specifically state what actions need to be taken by one, or all, parties in order to cancel the contract. Generally speaking, a written notice provided by one party to the other, is sufficient in cancelling a contract.

Rescission of a Contract

If one of the parties, who has entered into a contract, turns out to have misrepresented themselves, or acted illegally, then the contract termination is known as rescission of a contract. This essentially serves a complete eradication of the contract. Many contracts will include a cancellation clause to address such issues; should you find yourself in a position of needing or wanting to rescind a contract, you will want to ensure that you are doing so in accordance with what the appropriate clause in the contract states. Some reasons as to why rescission of a contract may occur, include:

  • One of the parties being under the age of 18 and therefore not being legally capable of entering into a legal agreement
  • One of the parties lacking the mental capacity to enter into a contract
  • One of the parties being coerced (threats, blackmail, etc.) into signing the contract

There are any number of reasons as to why a contract may be cancelled or terminated. Obviously, the ideal scenario is when all of the parties involved are in agreement as to doing so and the reasons as to why.

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