You signed a contract, but things aren’t working out. Maybe the services you signed up to haven’t met your expectations. You’ve found a better deal, or you’ve realised that you just can’t work constructively with the other person. It happens. What can you do to get out of the contract?
Are you legally bound by the contract?
It might be the case that you aren’t actually legally bound to continue with the contract.
This may be because the contract has not yet been fully formed. For example, the contract might not yet have been signed by the other party, or there may be some key terms that you have not yet agreed on.
Another reason could be that the contract only becomes binding once certain preconditions set out in the contract have been met. For example, you may not be obliged to purchase a property until your bank has agreed to lend you a certain amount of money.
In some cases there are special laws that apply to particular contracts, meaning that a contract will not be binding until the parties do certain things or provide certain information. For example, the landlord of a commercial property must provide the tenant with a disclosure statement before a commercial lease is binding on the tenant. There are similar laws that also apply to franchise agreements and contracts for the purchase of residential property or an interest in a small business.
Is there a ‘cooling off’ period?
Your contract may have a built-in ‘cooling off period‘, giving you the opportunity to cancel the contract without consequence if you change your mind.
For some contracts, a cooling off period is mandatory so you may be entitled to cancel the contract within a certain time-frame even if this is not specifically stated in the written contract. This applies to franchise agreements and some contracts for the purchase of a property or business.
If you are unsure whether you are bound by your contract, it is important to get legal advice as soon as possible or you may miss the opportunity to stop the contract before it is fully formed or use any cooling off periods that may apply.
Even if the contract is fully formed and any cooling off period has expired, you may still have options to get out of the contract, as we explain below.
Can you negotiate your way out?
You may not be the only one regretting your decision to enter into the contract. The other party may feel the same. Sometimes it is very helpful to have an early and honest conversation with the other party to explore how you may both be able to happily walk away from the contract.
The conversation can be positive and doesn’t need to be unpleasant, but you should get legal advice before having it. You should also continue to comply with your side of the contract until both you and the other party have agreed and fully documented the basis on which you are both prepared to cancel the contract.
We have guided many clients through these conversations to get a result that both parties are happy with. Call us on 1300 654 590 if you’re in this situation, and see how we can help.
Is the other party in default?
In simple terms, a contract is a set of rules that each party must abide by when dealing with each other. If one party isn’t playing by the rules, then most written contracts will allow the innocent party to take steps to bring the relationship to an end.
It is likely that your written contract will specify a list of ‘trigger events’ (also known as default or termination events) such as the other party failing to uphold their end of the contract, or becoming bankrupt/ insolvent. If any one of these trigger events occurs, this may give you a straightforward way to get yourself out of the contract.
Most of the time you will first need to give the other party a written notice of the trigger event, and give them an opportunity to fix up the problem, before you can bring the contract to an end. It is very important that you follow the steps exactly as set out in the contract, otherwise you may give the other party a free shot to say that you haven’t played by the rules.
We are experts at combing through contracts and may be able to find a trigger event that can help you get out of a contract. Call us on 1300 654 590 if you’d like some help.
What happened before the Contract was made?
Sometimes it will be relevant to reflect on why you entered into the contract in the first place. If you were convinced to sign the contract because of something the other party said, and it turns out what they said was inaccurate or a lie, then the contract might not be valid.
Have a look back at any emails or other correspondence you exchanged with the other party before you entered the contract. Think about whether you had any meetings or conversations with the other party and whether you took any notes of what they said.
Did the party say anything that turned out to be untrue? Would you have signed the contract if you knew at the time that it was untrue?
If you answered ‘yes’ and ‘no’ respectively to the above questions then you should gather any documents that you have which record the statements made by the other party (including any meeting notes that you made at the time), put them in date order and then call us on 1300 654 590 to talk about your options.
Unfair Contract Terms?
Australia has a special law, called the Australian Consumer Law (ACL), that steps in to protect consumers and small businesses from contract terms that are unfair. If your contract is very one-sided and allows the other party to:
- Limit their obligations under the contract;
- Bring the contract to an end;
- Take action against you if you don’t comply with the contract; or
- Change the contract,
but doesn’t give you the same rights, then it is possible that the ACL can step in to override or invalidate those terms.
If you would like to discuss your options to get out of a contract, or need some help to prepare a contract that avoids these issues, call us on 1300 654 590 and we’ll be happy to help.