How to Get Out of a Business Contract
To learn how to get out of a business contract, you must make sure you don't violate a breach of contract.3 min read
Updated November 26, 2020:
How to Get Out of a Legal Contract Without Being Sued
When determining if you can get out of a legal contract without facing a lawsuit, you should look at a few key pieces of the document.
- Clauses. Look at your contract to see mentions anything about early termination. For instance, the contract might let you end it early, but you may pay a termination fee.
- Illegalities and policies. If a contract has an illegal circumstance or violates public policy, it is not enforced. A contract made when one party lied is also not enforceable due to fraud or deception.
- Impossibility. A contract can end with impossibility. This occurs when one party's duties are impossible to fulfill.
- Frustration or impracticability. Although typically more difficult to prove in court, frustration means the contract's purpose lost its value due to something that happened outside of either party's control. Impracticability occurs when the contract's fulfillment is unreasonable, such as a natural disaster happening.
Defenses of Breach of Contract
When it comes to defending a breach of contract, there are several defenses you could take.
- Material breach by the other party. If the person you signed the contract with has breached the contract, you no longer have liability as long as the breach is material. A breach is material if it defeats the contract's purpose.
- Anticipatory repudiation. If the other party declares that he or she will not perform the obligations stated in the contract, you absolve your obligation to perform.
- Duress. If you signed a contract against your will, you hold no responsibility for it. This defense includes physical and economic pressure.
- Unconscionability. An unconscionable contract is one-sided in favor of a party with superb bargaining power.
- Mistake. A contract that has a material mistake regarding the subject matter is not enforceable.
- Fraud. If you entered a contract because of misrepresentation by the other party, the contract is not enforceable. However, it is enforceable against the party that committed the fraud.
- Undue influence. If one party exercises control over another to overcome the party's independent judgment, the court will not uphold the contract.
- Impracticability. If an unexpected event makes completing the contract impossible, neither party is bound by the contract.
There are other aspects to consider.
- Loopholes. Lawyers can help you determine if your contract has a loophole that can give you an out.
- Statutes. Federal or state statutes may invalidate your contract.
- One-sided clauses. Most states interpret a one-sided clause as reciprocal.
- Ambiguities. These are interpreted against the drafter.
- Modification. The other party might want to renegotiate based on changed circumstances.
How to Avoid Getting Stuck in a Bad Contract
When it comes to a contract, you should avoid it if the agreement doesn't match the business deal. Both parties must agree upon the business terms established in the contract. Also, watch for language in the contract. Some clauses to pay attention to include the following:
- Integration clause. Also called entire agreement clause, it means that the contract is in complete agreement. All verbal agreements not included in the written contract are invalid.
- Limitation of liability clause, which may limit a seller of vendor's liability for breach of contract regardless of damages.
- Indemnification clause. This is a common clause found in contracts that shifts potential costs and risks from one party to another.
- Termination clause. As a business owner, you might enter into long-term contracts without having the flexibility to terminate under their own terms.
Getting Out of a Bad Payment Services Contract
If you registered for a merchant services account and the price is higher than you anticipated, there's a possibility that you could get out of the contract without paying an early termination fee. You must prove that the company lied to you. Having written documentation, including email, works in your favor.
Also, if your merchant service provider hasn't lived up to their promises and you have documentation proving it, you might have a case for a breached contract. Also, if you don't like your agent and feel deceived, you might want to get out of the contract. However, you want the agent on your side, so avoid threatening him or her. Show respect and understanding.
If you need help with how to get out of a business contract, 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.