A contract is basically an agreement between two or more parties that specifies things that either party will be doing or not doing. Normally, the termination of a contract happens when the stated conditions have been fully completed or complied with by all parties involved. To begin with, since the contract is created to fulfill the obligations specified in it, the parties involved have an obligation to meet the specifications of the contract before concluding it.
However, there are instances that hinder a party from doing the specified tasks, hence the need to terminate the contract. This will usually result in certain conditions or clauses that might penalize either party. By knowing how to terminate a contract prior to its start, you can understand the best ways to deal with the situation even if you have not yet started executing the contract yet.
•Review the contract. Do not take the letter and spirit of the contract itself for granted. You will need to review the contract in its entirety, so that you know the scope and limitation of the agreement. Look for the section where contract termination is discussed. Since contracts may vary for every circumstance, it is best to see how you can terminate the contract without going out of the given boundaries.
•Look for a rescission clause in the contract. Rescission refers to the right to have a contract terminated, if it has been mistakenly signed into as a result of misrepresentation or due to undue influence. Most of the time, a contract will state that only one of the contracting parties has the right to rescind the contract. If the contract stipulates your exclusive right to rescind, then there is legality in terminating the contract without the need of fulfilling any obligation. If the other party involved in the contract has the right to rescind, you may be able to convince them to set the contract aside.
•Inform the other party of your decision. The other party or parties involved must be informed of the decision you make, especially if you plan to rescind or cancel the contract. First, contact the parties involved informally and tell them that you want to terminate the contract. State your reasons. Be sure that you can provide the appropriate information and justification so that you can explain your reasons for deciding to terminate the contract. The other parties should support your request if it will not involve any undue cost. After such discussion, proceed to formally cancelling the contract.
•Write a notice of contract termination. Aside from the written notice of contract termination, prepare the supporting documentation necessary to justify your decision to terminate the contract. Send these to the other contracting parties. If the contract specifically stipulated that the termination of the contract must be initiated by an official notice coming from you, do this before making any unofficial notice of termination.
If the attempt to terminate the contract failed, you can resort to breaching the contract by refusing to do the task specified in the contract. Doing something that the contract prohibits may automatically terminate the contract, and you can use this as a last resort. Do note that this might sometimes warrant contractual damages, in which the other party might resort to filing a lawsuit in the courts of law, or charging you fees for contract rescission.
