What Happens If You Want to Back Out of a Business Contract You Signed with a Client?

What Happens If You Want to Back Out of a Business Contract You Signed with a Client?

Carrie Pallardy
Carrie Pallardy
 | 
Business contracts are written to be legally binding documents. Once you and your client sign, you are bound to the terms laid out in that contract. What happens if you don’t want to or are unable to abide by those terms?
Reasons to Leave a Contract
A broken contract can be difficult to manage. It will likely affect your relationship with your customer and potentially your reputation. First, determine why it is necessary to break the contract.
Common reasons businesses may want to back out of a signed contract include:
  • Invalid contract. In some cases, a contract may be considered invalid due to a mistake or fraud. If the terms of the contract are unfair or heavily weighted in favor of your client, it is possible that you have grounds to break the contract.
  •  Breach of contract. It is possible that your client may breach the terms of the contract. In this case, you likely do not want to be bound to a contract when the other party has already violated the agreement.
  • Inability to fulfill the contract. Sometimes the unforeseen arises. You may find yourself unable to meet the terms of the contract you signed with your contract.
How to Back Out of a Signed Contract
If you plan to move forward with breaking a contract, what steps can you take?
  • Talk to your client. Clear communication can go a long way. Ask for an open dialogue when you explain to your client why you want to break the contract. Is there something they could do differently on their end to salvage the agreement? Would they be willing to dissolve the contract?
  •  Restructure the contract. If your client is willing to have a conversation about the contract, consider restructuring the document rather than breaking it completely. It may be possible to rework the contract to have terms that both parties can uphold going forward.  
  • Talk to a lawyer. It is possible to face legal ramifications for breach of contract. If your client is unwilling to release you from the contract, a lawyer can help to examine the original terms of the document and outline your path forward. A contract lawyer will be able to spot any language in the original contract that invalidates the document, discuss your options if a client breaches the agreement first and offer insight into what to do if you cannot meet the terms of the contract.
A Lesson for the Future
If you have gone through the challenge of breaking a client contract, you likely want to avoid the same issue in the future. When drafting future contracts, it is possible to include language that allows the contract to be terminated. An express right to terminate could allow either signing party to end the contract. You could also include provisions to this contract clause that outline specific circumstances in which it is permissible to end the contract.

Businesses can work with a contract lawyer when drafting new contracts and considering how to exit existing contracts.


This article is intended to convey generally useful information only and does not constitute legal advice. Any opinions expressed are solely those of the author, not LawChamps.
 
Carrie Pallardy

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