Escaping the legally binding contract

Ever regretted

signing on the dotted line?

Dispute Resolution Solicitor Asit Jansari is often asked by business owners who have entered into contracts whether they are able to escape the legally binding nature of a contract. So, are they? Asit talks through what a business can do if they find themselves ‘stuck’

Businesses that have entered into contracts may potentially later regret having done so – or perhaps they have found that terms they previously agreed to, no longer fit their business model.

As you would expect, there is often a right and a wrong way to approach such matters; there is also a multitude of grey in between. A great solicitor will consider the facts, weigh up the risks involved and consider the proposed course of action. Clients can then take a course of action once they are fully informed.

Equally, though, there is always going to be a wrong way and this could end up causing a waste of money in legal fees, with a lawyer trying to tidy up the mess.

Unless there is a termination of convenience clause built into the contract (this may depend on the specifics the lawyer engaged with when entering into the contract), it is worth starting by saying that you cannot get out of the contract simply because you have changed your mind.

If you attempt to do so, you may find that the other side of the contract might make threats to pursue damages against you as a result of the breach of contract.

So, what options do you have if you have committed yourself to a legally binding contract and want to get out?

Firstly, speak to a specialist commercial lawyers, as the terms of the contract you are in will need to be considered together with the reasons and circumstances for your seeking to escape the terms of the contract.

It will of course be very important to understand what the potential damages (charges) for breaching the terms of the contract may well be. The three steps I would then suggest are:

1. Ask the other side if you can be released

Simple as this might sound, it is often the one thing that some business owners do not consider. It could save a fortune and the working relationship. Instead, they seek to employ tactics like delaying/ceasing payments, failing to supply goods or services, or being awkward in the delivery of the contract. This rarely, if ever, works.

2. Termination clauses

Once the first option has been explored, I would then consider looking at the termination clauses within the contract itself, as there may be some opportunity to come out of the contract early – perhaps for a fee or by giving notice.

3. The small print

At this stage, you may need a solicitor to assist you. The solicitor will be looking for any mistakes, unfair clauses or loopholes that will allow you to exercise a right to terminate the contract legally, without costing you anything in terms of the payment of damages.

Whilst you may have a legitimate reason for wanting to terminate a contract, which could be for reasons including a perceived breach of contract by the other party, it’s important to take clear and proper advice and to act within the law – even where you believe there to have been a breach of contract, as this may not simply end the contract itself. Failure to do this can be costly, both in terms of cash and business reputation.

If you need advice or assistance in relation to the termination of a contact, call Asit on 0116 319 1110 or 077613 25968.

IT WILL OF COURSE BE VERY IMPORTANT TO UNDERSTAND WHAT THE POTENTIAL DAMAGES (CHARGES) FOR BREACHING THE TERMS OF THE CONTRACT MAY WELL BE