Establishing a contract legally binds the parties in some kind of business endeavor. So if you enter into a contract, you should know how the contract may terminate and release you from your obligation. Breaking off a contract without cause may subject you to legal retaliation.
The termination of a contract might happen because you have completed your obligations in the document. However, sometimes events occur that are not in your control and necessitate the end of the agreement. Another contract you have signed may also be a factor.
Using a prior agreement
Chron explains that sometimes contracts end not because of the contract itself but due to another written agreement. You may write out a document that specifies your contract will terminate in the event of a specific reason. Entrepreneurs usually call this provision a break clause. A prior agreement must lay out specific circumstances to break a contract, including whether one party has to give the other party written notice to terminate the contract.
Inability to complete the contract
A contract binds you or other parties to meet some kind of obligation. But if you were to get into an auto accident, you might suffer injuries that do not allow you to meet your end of the deal. If so, the other parties could terminate the contract on the grounds of “impossibility of performance.”
Fraud or mistake
You might learn that the other party to your contract entered into the agreement on false pretenses. The person may not have the qualifications to perform according to the contract. The individual may suffer from mental incapacitation and cannot consent to a contract. Some people sign a contract to buy a home only to find the residence has serious flaws that the owner had concealed.
In the event you find another party has committed fraud or just made mistakes, you could seek a rescission of the contract. This terminates the contract and frees you from its obligations. You might also seek termination if the other party breaches the contract. In this situation, seeking damages may be an option.