Terminate a Contract

I Want To Terminate A Contract I Signed – What can I do?

Whether it pertains to employment or business, a contract is a legally binding agreement that holds the contracting parties accountable for their promises. In employment law, contracts are used to set out the terms of employment and govern the relationship between the employer and employee. In the commercial context, contracts ensure stability in everyday business transactions by imposing liability onto parties that fail to fulfill their contractual obligations. However, this does not mean that signing a contract is determinative. In some instances, it may be possible for contracting parties to terminate an agreement even after signing. This article discusses the essential elements of a contract and how it may be terminated or deemed unenforceable.


What are the elements of a contract?


A contract is said to be formed when parties have come together, and there is a meeting of the minds. For a legally binding agreement to be formed, the following necessary elements must be present:


  • Offer
  • Acceptance
  • Consideration


Contract formation has not occurred when an agreement lacks one or more of these elements. Parties who may benefit from such arrangements cannot rely on the courts to impose liability as there was no legally binding agreement.


For example, if two parties have entered an agreement but lack mutual consideration, neither party is legally obligated to fulfill their obligations. Consideration is defined as a detriment or benefit that is given in exchange for something else. There must be a consideration for all parties involved for a contract to be legally binding and enforceable. 


Except in an unconscionable contract, the freedom of contract principle grants parties the freedom to enter into seemingly one-sided agreements. As long as there is some exchange of consideration, a contract will be enforceable despite its imprudence. 


Sometimes, a contract may include a clause stipulating how one party may terminate the agreement without discharging their contractual obligations. 


How can I terminate a contract without discharging my contractual obligations?


Termination clauses can be found in standard form contracts. For example, companies that contract out their services to many consumers may draft an initial standard contract that can be applied to subsequent transactions. In addition, a termination clause may stipulate when and how a contracting party may terminate an agreement without fulfilling their obligations.


For example, a 2-year contract between a telecommunications service provider and a consumer may stipulate that parties can opt out of the agreement before the end of the term. The option to terminate a contract may depend on some consideration being given in exchange for the early termination. This may be a fine or penalty paid to the non-terminating party. 


Similarly, an employment contract may include a resignation clause outlining the early termination process. Even without such a clause, a court will not force an employee to remain under an employment contract or perform work duties against their will. While most resignations may require minimal notice to the employer, sometimes an untimely resignation may result in subsequent legal risk. Therefore, employees and contracting parties should always refer to the contract terms when considering early termination or resignation. 


Can I get out of an unenforceable contract?


Contracting parties may be excused from further performance of any contractual obligations when a contract is legally unenforceable. An agreement may be deemed unenforceable for the following reasons:


  • Ambiguity
  • Mistake
  • Unconscionability


Courts are reluctant to strike an entire contract as unenforceable when any of the above claims are made. For example, when a party claims an agreement is unenforceable because of ambiguity, a court may strike down only the terms open to multiple interpretations to restore the rest of the contract. A contracting party that wishes to terminate an agreement and avoid fulfilling its contractual obligations will not be able to rely on the unenforceability of specific terms. 


If you have any concerns regarding an employment contract or its terms, our team of experienced employment and human rights lawyers at Achkar Law can help. Contact us by phone toll-free at +1 (800) 771-7882 or email us at [email protected], and we will be happy to assist.