Contracts are there to protect all parties involved, but sometimes, we want to get out of a contract early if our circumstances change.

This article explains the ways you can get out of a contract, including tips for mitigating how much you might need to pay.

A thorough understanding of contract law is often needed, so alongside this guide, you should consider getting legal advice if you think you could void your contract.

Key takeaways

• You can get out of a binding contract under certain circumstances.
• There are seven key ways you can get out of contracts: mutual consent, breach of contract, contract rescission, unconscionability, impossibility of performance, contract expiration, and voiding a contract.
• While it’s nearly impossible to get out of a contract with no cost, there are ways you can mitigate costs by negotiating with the other party and documenting any breaches that have taken place.
• With a force majeure clause, in extreme circumstances like natural disasters and war, contracts can be affected and even terminated entirely.

Can you get out of a contract?

Yes, under certain circumstances.

Contracts are legally binding agreements between two or more parties, stipulating their rights and obligations. However, they’re not always set in stone.

There are provisions and circumstances that can allow a party to legally get out of a contract, but it’s crucial to understand the methods and potential consequences of contract disputes.

Trying to get out of a contract early can lead to legal costs and damaged relationships.

1. Mutual consent

The easiest answer to how to get out of a signed contract is for both parties to agree to terminate it. If both parties are on the same page, they can mutually decide to end a contract without any penalties.

Pros:

• Avoids litigation, which can be costly.
• Can preserve the relationship between parties once the contract is ended.

Cons:

• Both parties might not readily agree.
• It may involve negotiations that lead to additional costs or compensations.

2. Breach of contract

Suppose one party fails to fulfill their obligations as per the contract. In that case, the other party may have grounds to terminate and get out of a contract.

However, it’s essential to ensure that the breach is substantial and not just a minor infraction if you’re wondering how to break a binding contract.

Pros:

• Provides a strong legal ground for termination.
• Possible compensations for damages.

Cons:

• Might lead to legal disputes, increasing costs.
• Can damage the relationship with the other party.

3. Contract rescission

Rescission refers to the undoing or cancellation of a contract. This usually happens when there’s a mistake, fraud, or misrepresentation by one of the parties involved.

Pros:

• Completely undoes the contract.
• Returns both parties to their pre-contractual position.

Cons:

• Requires strong evidence to support claims.
• Could lead to legal battles if not mutually agreed upon.

4. Unconscionability

A contract or specific term may be deemed unconscionable if it’s excessively one-sided, oppressive, or goes against the law. Courts can void these contracts or terms within them.

Pros:

• Protects weaker parties from exploitation or unfair contract terms.
• Highlights the importance of fairness and equity in agreements.

Cons:

• The threshold for proving unconscionability can be high. The term must typically be extremely one-sided.
• The subjective nature of unconscionability means it can be inconsistently applied.

5. Impossibility of performance

This occurs when unforeseen events make fulfilling the contract’s terms impossible. It’s different from force majeure in that it directly affects the contract’s primary obligations rather than external circumstances.

Pros:

• Offers a legal basis to terminate if genuine impossibility exists.
• Provides a natural exit from obligations without fault from either party.

Cons:

• The event must make performance completely impossible, not just more difficult or expensive.
• Disputes can arise regarding whether the situation truly constitutes impossibility.

6. Contract expiration

Many contracts have a specified duration. Once that duration expires, the contract ends naturally — unless there’s a clause that renews it.

Pros:

• Natural, non-confrontational end to obligations.
• No need for legal actions or interventions.

Cons:

• Having to wait for the contract to end might not be feasible in urgent situations.
• Some contracts have auto-renew clauses that could catch you off guard.

7. Voidable contracts

If a contract was entered into under duress, or if one party lacked contractual capacity (such as a minor or someone mentally incapacitated), it may be considered voidable.

Pros:

• Provides an exit for contracts made under duress or misrepresentation.
• Protects parties who lacked capacity at the time of the contract’s creation.

Cons:

• Establishing a contract as voidable might require legal proceedings.
• The other party might contest the claim, leading to complications.

How to get out of a contract without paying

Getting out of a contract without paying can be challenging and often impossible, but with careful planning and negotiation, you can often reduce or eliminate costs.

Here’s a guide on how to navigate this, including tips to mitigate the amount you might owe:

1. Review the contract

Before making any moves, understand every term and condition in your agreement.

Tip: look for any loopholes or early termination clauses. Some contracts may have a cooling-off period or provisions that allow for termination under specific circumstances.

2. Open negotiations

Speak to the other party. They might be willing to negotiate, especially if they value the relationship or see potential long-term benefits.

Tip:

Always approach negotiations with a solution in mind. Offer alternatives like extended services or future commitments that won’t require immediate payment.

3. Document any breaches

If the other party hasn’t lived up to their end of the deal, document it. This can be powerful leverage.

Tip:

Maintain a detailed log of every breach or failure. Dates, times, and outcomes can help bolster your argument.

4. Invoke force majeure

If there’s a force majeure clause and an unforeseen event has occurred, it might be grounds for termination.

Tip:

Ensure that the event genuinely qualifies as force majeure under the contract’s terms (more below).

5. Seek legal counsel

A lawyer can provide strategies tailored to your specific situation.

Tip:

Before hiring, be transparent about your financial constraints. They might offer alternative billing arrangements or give you guidance on how to handle simpler matters yourself.

6. Document everything

Record all interactions and transactions related to the contract.

Tip:

Regularly back up any electronic communications or store hard copies in a safe location. This documentation can be invaluable if disputes arise.

7. Offer a settlement

If all else fails, consider offering a reduced sum to close out the contract.

Tip:

Frame this as a win-win for both parties. Emphasize the time and resources both sides will save by avoiding protracted disputes or legal proceedings.

What is a force majeure clause, and how does it affect contract termination?

A force majeure clause is a standard contractual provision that frees both parties from liability or obligation when an extraordinary event or circumstance beyond their control prevents one or both parties from fulfilling their contractual obligations.

Examples include natural disasters, wars, pandemics, and other unforeseen events.

When invoked, the force majeure clause can lead to a suspension of the contract or, in some cases, its termination.

However, it’s crucial to understand that not every unexpected event qualifies. The specifics will often depend on how the clause is written in the contract.

Ensure you know how to get out of a legally binding contract if you need to

While contracts are designed to be binding and enforceable, there are mechanisms and provisions that allow us to get out of contracts or modify them.

It’s always best to enter contracts with a clear understanding of the terms and your rights.

With PandaDoc, navigating your contracts becomes a seamless experience.

From contract generation to electronic signatures, you can be confident in the validity of the contracts you create and sign.