Home Articles Five ways to get out of a contract without being sued

Five ways to get out of a contract without being sued

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It’s not uncommon for people to want to get out of a contract they’ve signed. Whether it’s a gym membership you never use, an overpriced mobile phone contract or a lease agreement you no longer want to be part of, we’ve compiled a guide of how you can legally break these agreements without leaving yourself open to legal action.

It’s important to note, the law generally requires you be over the age of 18 to enter a legally binding contract. If you aren’t 18 and want to exit an agreement this is a good place to start as legitimate grounds for termination. The same goes for individuals the law deems to lack the competence to contract with a third party. Those with mental impairments and in some cases severe mental illness will generally not be bound by the terms of the agreement due to their lack of capacity.

If you are over 18, competent and signed the agreement, the first step is to re-read the terms of the contract in case there are any termination clauses or exit provisions which may work to your advantage. If you don’t find any relevant terms, any one of the following may be applicable.

1. A grossly unfair agreement

The law frowns upon agreements that heavily favour one party over the other. These unconscionable contracts may be held to be invalid if the courts determine they clearly demonstrate a bias towards one party over the other. Whether it applies to you will depend on your individual circumstances. For example, if your mobile phone provider increased the monthly cap on your contract despite the fact you regularly experienced disrupted service, you may be able to exit the agreement without paying a cancellation fee.

2. Mutual cancellation

If you have entered an agreement with someone and it’s clearly not working out, there’s a chance they may agree to cancel the contractual relationship. However, if your counterparty is benefiting greatly out of the deal its unlikely they will agree to a mutual cancellation. For example, you enter an agreement to have personal training sessions but the trainer stops showing up. You may be able to cancel any future sessions and seek a refund on those sessions missed had you already paid.

3. Breach by the other person

A material breach occurs when the other party does something to void the contract. It’s a good idea to re-read over the terms to check and see if in fact they have done anything which would allow you to terminate. More complex contracts will often set out a range of actions or omissions in the terms and conditions which constitute a breach. For example, you enter a contract for someone to make and decorate a unique and elaborate cake for your wedding but the patissier sells your cake to someone else. Due to the obvious breach you wouldn’t be required to pay. If you had paid you would likely be entitled to a refund.

4. Fraud

If you have entered a contract based on fraud or misinterpretation it will generally be held to be invalid. Many of you will have experienced the over exaggerated sales pitch of someone trying to close a deal then finding yourself having signed up for something based on a host of inaccuracies. If this is the case, you may be able to extricate yourself by arguing fraud or misrepresentation. For example, you purchase a bike from someone advertising it to be brand new but you find the bike to be rusted and the handlebar falls off. You would be entitled to a refund based on the fraudulent claims of the seller, who either knew the bike wasn’t brand new or failed to check its actual condition.

5. Breach of legislation

In some industries in Australia, legislation governs the manner in which agreements are entered into. For example, The Franchising Code of Conduct, requires a cooling off period be offered, allowing franchisee’s to terminate within seven days of entering the agreement. Should this not be offered it means the franchisor is in breach of the applicable legislation and you can legally terminate the contract.

Depending on the individual circumstances of your agreement it certainly is possible to extricate yourself from a contract you have signed. Always check the terms and conditions first and never be afraid to seek termination if the agreement is blatantly defunct.

Kate Horman is the founder of The Lazy Lawyer, a website dedicated to providing consumers with essential legal insights and documents at a fraction of the cost. Prior to this Kate worked at a corporate law firm and a large multi-national.

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