Can Contracts Be Broken: Everything You Need to Know
If you're wondering, “Can contracts be broken?” the short answer is “Yes.” Depending on the type of contract, including its specific terms and conditions, there may be serious financial and/or legal consequences to pay if you commit breach of contract. 3 min read
Updated July 1, 2020:
If you're wondering, “Can contracts be broken?” the short answer is “Yes.” Depending on the type of contract, including its specific terms and conditions, there may be serious financial and/or legal consequences to pay if you commit breach of contract. There are instances, however, when you can break a contract with no fear of liability.
Reasons to End or Terminate Contracts
Contracts depend on the following:
- Definite terms
- Clear expectations
- A transparent, detailed subject
Before trying to get out of a contract, examine the initial agreement you made. Look closely at the specific language. In many instances, cancellation conditions are included in the contract. You might be able to find an escape clause or even a loophole that lets you get out of the contract early with no consequences.
You can break a contract legitimately if the other party consents to it. It's best to get the consent in writing, if possible.
When people do what a contract calls for them to do, it's called "performance." Sometimes, something happens that makes performance impossible, which is known as “impossibility of performance.” In that instance, either side can end the agreement with no fear of legal consequences.
If you as well as the other party committed the same mistake in entering into the contract, you may break it. This is called rescission.
If one side does something improper, like misrepresent itself or commit fraud, you may be able to break the contract. If you contract with a car dealer to buy a car that's in “like new” or “excellent” condition and it breaks down immediately after you leave the car lot (for instance, engine damage was purposely hidden from you), the dealer has likely committed fraud. In this case, you'd be able to break the contract without penalty.
Another category of voidable contracts involves minors. A person can sometimes break a contract because the law states minors aren't of legal age to enter into one in the first place. Similarly, if an elderly person who's lost the capacity to understand his or her surroundings makes a contract to buy vacation property, the contract can be rescinded since the person wasn't mentally able to understand the terms.
The legal system also tends to frown upon contracts it considers “unconscionable,” or ones that heavily favor one side with outrageous terms.
A contract breach happens if one party does any of the following:
- Refuses to do its part
- Does something it's not supposed to
- Prevents you from doing what you're supposed to
If the other party gives you an indication that it's no longer interested in holding to the contract or it backs out entirely, you're usually free from the contract. This is what's known in legal terms as anticipatory repudiation or an anticipatory breach.
To be legally significant, a breach has to be considered serious, or “material.” Not all breaches justify court time.
If one party materially breaches the contract, the non-breaching party may consider the contract to be terminated. Contact an attorney if you have any doubts if a breach is actually material or not. If it's shown that it wasn't material and you fail to uphold your obligations, you could be held liable.
Other Ways to End a Contract
If there's prior agreement between parties about when a contract ends, that's one way to terminate it. In some cases, the contract states it can be terminated by either party; the only requirement is that one side provides notice to the other.
Some contracts have a provision that details how the contract can be terminated. The contract ends if the outlined conditions are met. You must be specific about such conditions when drafting a contract. Lawsuits can occur due to unclear language.
Illegal agreements, however, are not enforceable. You're able to break them without worrying about legal sanctions.
There are many complexities in contract law, so it's vital not to enter into a contract if you don't fully understand it. You might want to hire a professional well-versed in this area of the law if you need help with a contract. This will help you avoid potential legal hassles down the road.
If you need help with contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.