How to Break a Contract Early
So, you have finally closed a deal and signed a contract…but you are no longer happy with the agreement. Maybe the service you were promised was not delivered, or it was not delivered to the standard agreed to. Perhaps the product you thought you were getting wound up being something completely different. The Consumer Protection Act (the “CPA”) sets out a consumer’s rights and protects them in most consumer transactions. However, now that the contract has been officially dated and signed, is there any way to get out of it? The answer is: maybe.
Contracts are in place to protect both parties in scenarios where everything goes well and also in scenarios where things may not go as planned. This is why it is important to have a contract reviewed thoroughly before signing. There is a lot to consider before deciding to enter into a legally binding contract so you will want to make sure all of your bases are covered. For a more detailed breakdown, our blog – “10 Things to do Before Signing a Contract” - is a great and informative read!
Having a contract review completed prior to signing will help ensure that crucial clauses are included in a contract and can also bring your attention to wording that may be detrimental to you. If you are interested in learning more about important clauses typically found in a contract, check out our “Important Clauses in a Contract” here. If you find yourself in a situation where you need to get out of a contract, time will be of the essence. The sooner you realize the need to end a contract, the better as there may be penalties or other obligations that come with further delay.
Read on to find out how to get out of a contract you have already signed.
Getting Out of a Contract You Have Already Signed
If you have already signed a contract that you need to get out of, there are a few ways to do so. Although it may be tricky, unless there is an ironclad clause stating that termination or early termination is not possible, it is best that you have your contract reviewed by a legal professional so that you can be sure of your options. You can try discussing your concerns with the other party, making note of the contract’s cooling-off period, identifying a termination clause, seeking out whether the other party has committed a breach of contract or misrepresentation, identifying any force majeure clauses, or paying an early termination fee.
If you are able to explore even one of these options, you may be able to get out of a contract you have already signed. Below are some ways to get out of an already signed contract with little to no hassle.
Discuss Your Concerns With the Other Party
Although it may feel uncomfortable, discussing your concerns and grievances with the other party may be a quick and straightforward way to reach a resolution. Through a letter or an in-person meeting, you can explain your stance to the other party and see if they are willing to accept your request to terminate an agreement. When presenting your case, it is important to list specific reasons as to why you would like to end the contract.
It may also be helpful to provide reasonable compromises or solutions to show the other party that you are also considering their perspective on the matter. For example, if a contractor has agreed to pave your driveway using specific materials and you find out they have not, you are within your right to bring your concerns to them. If they do not rectify the issue, choosing to terminate the contract and get your payment(s) back is completely reasonable.
If you are not confident in your ability to reach a resolution on your own, you can also consider alternative dispute resolution measures to assist. If you enlist the help of a mediator for example, they will facilitate a meeting between you and the other party while acting as a neutral, third-party individual. As an additional benefit, this route is typically inexpensive and can speed up the entire process without having to involve the courts.
Keep in mind however, the other party may be less inclined to agree to you ending a contract if they will lose money or any other benefit previously gained from signing the agreement. It is important to keep all of these things in mind when first approaching the other party.
Engage During the Contract’s “Cooling-off Period”
With many contracts, there is a designated cooling-off period which provides you as a consumer, with a specific number of days during which you can cancel the agreement without reason or penalty. During a cooling-off period, a consumer is able to cancel an agreement if they have signed a contract:
“for a product or service you buy from a door-to-door salesperson (also called a direct agreement)
to pay in advance to join a fitness club or gym (also called a personal development contract)
to buy a newly built condo (under the Condominium Act)
to get a payday loan (under the Payday Loans Act)
to purchase a time share”
(Your rights under the Consumer Protection Act | ontario.ca)
The cooling-off periods for these types of agreements may differ so it is always important to identify the period and confirm the allowance of days. If you do not wish to continue with the agreement and you are within the cooling-off window, you are within your right to provide a notice of termination and end the legal tie with the other party. As mentioned above, you do not need to provide reason for cancelling the contract either. If you have simply changed your mind, that is reason enough to terminate the agreement without penalty.
For most contracts, the company or service provider will have 15 days to return your money to you. Many individuals are not aware of this cooling-off period and end up getting stuck in a contract they are not happy with. Always empower yourself before signing a contract and seek legal advice if possible. This could save you a lot of time and money!
Provide a Notice of Termination/Cancellation
Contracts will include a termination or cancellation clause outlining how a party must notify the other of a termination. If a contract you are signing does not contain this type of clause, it is best to hold off on signing until you can discuss this. Without a termination clause, you may run into issues concerning your allowance to terminate a contract and whether you will face any termination penalties. Once you have reviewed and confirmed that your contract contains a termination clause, it is imperative that you adhere to the instructions completely.
If the clause states that you must provide a notice of termination in writing with at least 30 days’ notice, be sure to do so. In a termination clause, a party may also outline what must be included in your notice. Things like reason for termination, how outstanding payments will be taken care of, and the specific date that your agreement will end are all typically required in a notice. Providing more information than not is always ideal because it leaves less room for confusion and misinterpretation. If you follow these steps, you may be able to end a contract without too much of a hassle. It is important to note that some contracts may contain early termination penalties that you will need to take care of. Not doing so may put you at risk for more penalties due to breach of contract.
You will also want to confirm that your notice has been sent and received by the other party. If you are sending your notice via regular mail, setting up a tracker will save you from arguments that the other party did not receive your notification. If you are sending your notice of termination through email, you can place a read receipt on your email or capture proof that you did not receive a notification error to corroborate the fact that your email was sent successfully. In all, if there is a termination clause in your contract, following the outlined requirements will ensure that you can terminate your agreement without additional pushback.
Misrepresentation
It is considered illegal for an individual or a business to give you false information regarding themselves or the product/service they offer. If they do this, it is considered misrepresentation. This is because you would have been sold a service/product under false pretenses. If you are promised a product of a certain grade, style, or quality and it turns out not to be as advised, this would be an example of misrepresentation.
Another example of misrepresentation would be an individual or business promising to deliver a product/service even though they know it is not possible. Misrepresentation can even take form in being recommended unnecessary repairs or replacements to items. If the other party falls short on their end of the deal or you realize you were made to believe something false, this would be considered misrepresentation and thus, a legal way to terminate a contract.
Force Majeure Clauses
A force majeure clause in a contract frees both parties from liability and obligation when an extraordinary event occurs beyond the reasonable control of either party. For example, wars, strikes, riots, or an epidemic are all considered events that would justify a force majeure clause being enacted. The purpose of this clause is to shield either party from consequences or penalties stemming from not completing an agreed upon task. If the event is beyond the reasonable control of a party, it is only fair that said party should not be on the hook for the incompletion of a service or damage.
If you are preparing to sign a contract that deals with something that could be affected by one of the examples mentioned under the force majeure umbrella, it is advisable that you have such a clause included. This will protect you from lawsuits down the line. If a force majeure clause is enacted and the consequences of the event cannot be rectified within a reasonable amount of time, this may be grounds for contract termination without penalty.
Pay an Early Termination Fee
Most contracts will contain a termination clause and will also outline the ramifications of ending a contract early, like early termination fees. An early termination fee or penalty are monies a person is obligated to pay if they end a contract before the agreed upon end date. If your reason for ending a contract early does not fall into the accepted allowances, you will likely have to pay an early termination fee or face the chance of being sued. This is why it is incredibly important to carefully review contracts before signing them. If you are in a situation where you must end the contract and are okay with paying a penalty, this may be your best course of action.
No one expects to have to end a contract early when they first sign on. Unfortunately, things may occur that cause the need for this. Although this list is not exhaustive, it includes quite common ways to end a contract early. As previously mentioned, before signing a contract you should always make sure to ask questions, review it thoroughly, and have a lawyer or paralegal review the contract for its legal merit. Signing a contract does not have to be as daunting as it is often said to be!
If you need assistance with drafting or reviewing a contract, contact Oduraa Legal Services today.
