When Can You Terminate a Contract without Being Liable for Breach?

When Can You Legally Refuse to Perform under the Terms of an Agreement?

When you enter into a contract, you make a legally enforceable promise to abide by the terms of that agreement. Typically, when you fail to perform as promised, you can be taken to court for breach of your contract. Are there situations, however, where you can refuse to honor the terms of the agreement, without facing sanctions in a court of law? Absolutely!

When Can You Terminate a Contract without Being in Breach of Contract?

Though an agreement may appear on its face to be valid, it can be considered void under the following circumstances:

• The subject matter of the contract is illegal—Contracts for the sale of banned substances or goods, or to engage in illegal activities, such as price-fixing, unlawful business practices or gambling
• There is evidence to suggest that one of the parties did not voluntarily enter into the contract—A party may have been misled into signing the contract through fraud or misrepresentation. Additionally, a party may have entered into the agreement because of threats of physical violence, or as a result of duress or undue influence.
• One of the parties to the contract may have lacked the legal ability at the time of the agreement to understand what it was and what it’s consequences were—A party may have been drugged or under the influence of alcohol, or may have been suffering from some mental health issues. Furthermore, minors are considered to lack the mental capacity to enter into a legally binding contract.
• The terms of the contract may have been “unconscionable” to one party—A valid contract assumes that both parties had relatively equal bargaining power. If the court construes that the deal was so one-sided as to be clearly unfair to one party, it may render the contract void.
• The contract becomes impossible to perform—If circumstances beyond a party’s control render the contract impossible to perform—a fire destroys goods to be delivered under a contract or a person signing a personal services contract dies or suffers a serious injury—the contract may be voided
• The performance of the contract would be contrary to prevailing public policy, such as requiring that an employee sign an employment contract that prohibits medical leave of any kind

Contact MCIS Law

At MCIS Law, PLLC, in Stafford, we provide comprehensive counsel to businesses in southeast Texas. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.