There may be times where a person has signed a contract, but then after further consideration, decides that they do not want to proceed anymore. A good example of this is when salespeople sell products that a consumer may not need, and then the buyer is stuck with fulfilling an unwanted contract. Businesses or large corporations also fall victim to this and can have second thoughts on agreements they made. Cost will usually be a large consideration as to why a party to a contract wants to cancel it. With that in mind, what are the necessary requirements to cancel a signed contract?
What is required to cancel a signed contract?
A contract is legally binding, which means that once it is signed, both parties agree to be bound by it. There is no inherent right to cancel a contract which is why it is such a powerful tool. To legally exit a contract, you must show that it was flawed from the beginning or that you never really intended to be bound by it. Sometimes, even a simple conversation will go a long way.
1. Have a conversation
The first way to exit a contract is also the easiest. As long as both parties can come to a suitable agreement, then the terms of the agreement is subject to change. Have a conversation with the other party and see if there is anything you can both compromise on, so that both parties remain pleased.
2. Is there an express right to terminate?
Sometimes an agreement will contain a clause that allows a party to terminate the contract at will. This is called an express right to terminate. Check to see if your contract contains this.
3. Does the contract comply with statutory requirements?
Statutory rules set by parliament often govern specific contractual arrangements. For example, Electronic Transactions Acts (ETAs) at both the federal and state/territory levels control the use of electronic signatures. A signature, and ultimately the whole contract, will not be valid if a party does not comply with the law on electronic signatures. Another example is based in property law. If the rules in the relevant state or territory legislation are not followed, then a contract will not be enforceable, and the sale of land will fall through.
To cancel a contract in this way, you would need to argue that the contract breached legislative rules, making it invalid and therefore cannot be enforced against you.
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4. Cooling-off periods
Another legislative tool is the cooling-off period. Again, this will be specific to certain industries or for the sale of particular goods and services. The Australian Competition and Consumer Commission (ACCC) advises that where an unsolicited consumer agreement occurs, a cooling-off period will apply. This means that for the consumer protection to apply, the seller must have approached you first to make an offer, whether that be through telemarketing or door-knocking. To see when a cooling off period may apply, have a look at the ACCC’s list of industries, goods and services. States may also provide a cooling-off period for non-consumer purchases such as when you purchase property or motor vehicles. For a better understanding, see here for NSW’s cooling-off period rules. If a cooling-off period applies to your contractual arrangement, you may still have time to exit without penalty.
5. Vitiating factors
A vitiating factor is something that causes a contract to be unenforceable because it voids the consent of a party to the contract. If a person abuses their power to unduly influence the other person, or hold them under duress to force them into the contract, or engages in unconscionable conduct, then a contract will be unenforceable. Likewise, if one party misinforms the other by engaging in misleading or deceptive conduct then the contract cannot be enforced.
If a vitiating factor exists, you can legally cancel a signed contract in a process known as rescission. Both parties will be put back in the position they had been in prior to the contract’s existence.
Finally
Agreeing to a contract is a big commitment. Therefore, it’s no surprise that trying to cancel a contract after it’s already been signed brings some difficulties with it. Some of these ways to exit your contractual obligations will be easier and less confrontational than others. If you require help, seek guidance from a contract lawyer today.
