If you and the other parties have done due diligence, you might find yourself in a contract that seems locked down tighter than the federal Mint. Hopefully your due diligence also included exit strategies in the contract, though you might find you need to pay out a bit of cash to exit the legal relationship. Getting out of a contract doesn’t always require a serious breach, and you can work with a business law attorney to figure out what your options are with a specific agreement. In the meantime, here are a few common ways you can slip out of a contract.
You can exit a contract by mutual agreement. That means both parties agree in writing that the contract is now cancelled and they are both free of any encumbrances of the contract. This is usually an option if neither party is benefiting from the contract or it might become a negative impact for both parties. You might have a harder time convincing the other party to mutual cancellation if they are benefiting from the agreement.
If you included exit clauses in the contract, you might be able to use them to exit. Usually, these involve making a payment — sometimes known as buying out — to the other party. If you agreed to purchase construction services, for example, and the project has been cancelled, you might have to pay a cancellation fee that is a certain percent of the expected value of the construction work that would have been performed.
Finally, if you can prove the other party breached the contract, you can ask for it to be legally terminated. This can be difficult and often requires working with a contract lawyer in Colorado who can dig through every detail of the contract.
Source: Startup Smart, “How to get out of a contract,” accessed Sep. 30, 2016