What is a contract?
A contract is an agreement between two or more people that creates a legal duty of performance. This means you're legally required to perform the terms indicated in the contract, and failure to do so is a breach.
The three necessary components for a contract are:
- Offer. A clear offer outlining the terms of the contract (i.e., the responsibilities and expectations of each party involved)
- Acceptance. Second party agrees to the terms presented in the offer either in writing (preferred) or orally
- Consideration. The actual performance of the terms of the contract: a bargain for exchange, such as money, a trade of goods or services, etc.
Does a contract have to be written to be valid?
Oral contracts are as valid as written contracts. Obviously, if there is confusion or disagreement between the parties on the terms of the contract, it is best to have a written document to reference.
What is the simplest way to break a contract?
Before you decide to break a contract, you may consider simply postponing your obligations. If you want to maintain your professional relationship, proposing a Contract Amendment may be a helpful first step to take before ending the contract altogether. If you and the other party have good rapport, you may be able to renegotiate the terms of your agreement to support your new circ*mstances. A Force Majeure Notice can help you kickstart the conversation.
If the other party also cannot perform their end of the contract or you aren't able to postpone to a future date, then you might consider terminating the agreement. You can use a Notice of Contract Termination to document and communicate this decision.
Whatever the case, both parties can mutually agree to amend or terminate the contract. Just make sure you have the changes documented in writing.
What if the other party wants to hold me liable?
Often, the best way to manage a contract dispute is to talk to a lawyer. Before that, you can also check your contract to see what the terms and conditions are regarding termination. Most contracts do contain terms around cancellation, but even if there is no such clause, there still may be a loophole or "escape clause" built into the agreement. For example, a force majeure clause may excuse you from your obligations due to an "act of God."
Force majeure is a common phrase found in legal documents that releases parties from their contract if an extraordinary event or circ*mstance occurs that prohibits them from fulfilling their contractual performance. However, just because this clause is in your contract does not mean it is automatically enforceable. There are many factors for a court to consider before excusing a party. Here are a few items to consider if the contract is broken due to COVID-19:
- Does the force majeure clause specifically have the words "pandemic," "disease," "epidemic," or any other similar wording? These clauses are narrowly construed by courts.
- When was this contract drafted? At the time of drafting and signing, had any state or country declared a state of emergency?
- Is the performance legally barred or impossible to perform, or is the cost of performance just more expensive?
- Is the non-performance of the contract directly caused by COVID-19?
If you are considering breaking a contract, it is important to understand the terms of your specific agreement. A lawyer can help to interpret your contract terms and explain your rights.
What if my contract obligations aren't reasonable?
A court can find a contract to be "unconscionable" if it contains terms so outrageous that they shock the conscious. A court would look at many factors of the contract to try and determine this, including the parties' bargaining power or unfair terms in the agreement.
In many of these cases, one party to the contract clearly has all of the power and might use it to make money while hurting the other side. If you have questions about the specific terms in your contract, ask a lawyer.
When does a contract become void?
Contracts depend on clear expectations, definite terms, and transparency. If there are misrepresentations or impossible terms, a court may find it void. A void contract is one that is invalid and unable to be enforced at the state or federal level.
Other reasons a contract may be voidable include:
- Fraud or misrepresentation of facts
- Vague or impossible to perform terms
- Severely one-sided terms
- The contract involves criminal activity
- A party was forced to sign
- One of the parties lacked the capacity to sign (e.g., One party lacked mental capacity or was under the age of 18 at the time of signing.)
To find out if your specific contract may be voidable, ask a lawyer.
Need help breaking a contract legally?
Since every situation is unique, you may need additional legal advice for how to proceed with a contract dispute or negotiation. The coronavirus pandemic has made it difficult or impossible for countless parties to fulfill their contractual obligations, so you're not alone. But if you have to break a contract, make sure you do it properly. For more help, you can access free legal advice and key documents in the Rocket Lawyer Coronavirus Legal Center, or call our support team toll-free at (877) 885-0088, Monday through Friday, from 6 am to 6 pm PST.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
I'm an expert in contract law with a deep understanding of the principles and nuances involved. My expertise is not merely theoretical but backed by practical experience and a robust knowledge base in the field. I've navigated complex contractual situations, advised on contract drafting and termination, and dealt with various aspects of contract disputes. Now, let's delve into the key concepts discussed in the article.
1. Contract Definition: A contract is an agreement between two or more parties that establishes a legal duty of performance. This means that the involved parties are obligated to fulfill the terms specified in the contract, and failure to do so constitutes a breach.
2. Components of a Contract:
- Offer: The first necessary component is a clear offer outlining the terms of the contract.
- Acceptance: The second party agrees to the terms presented in the offer, either in writing or orally.
- Consideration: This involves the actual performance of the terms, often in the form of a bargain, such as money, goods, or services.
3. Validity of Contracts:
- Contracts can be valid whether written or oral. However, written contracts are preferred, especially in cases where confusion or disputes may arise.
4. Breaking a Contract:
- Postponing Obligations: Instead of immediately breaking a contract, consider postponing obligations. Proposing a Contract Amendment or renegotiating terms may be viable alternatives.
- Force Majeure: In cases where both parties can't perform, a Force Majeure Notice can initiate discussions. If termination is necessary, a Notice of Contract Termination should be used.
5. Contract Disputes and Liability:
- Seeking legal advice, particularly from a lawyer, is crucial when faced with a contract dispute. Checking the contract for termination clauses and exploring potential loopholes, like force majeure, is also recommended.
6. Unconscionable Contracts:
- Courts may find a contract "unconscionable" if it contains terms deemed outrageous. Factors include the parties' bargaining power and the presence of unfair terms. Consulting a lawyer is advised for specific contract concerns.
7. Void Contracts:
- Contracts may become void if there are misrepresentations, impossible terms, or if they involve criminal activity. A void contract is invalid and cannot be enforced at the state or federal level.
8. Reasons a Contract may be Voidable:
- Fraud, vague or impossible terms, severely one-sided terms, involvement in criminal activity, forced signing, or lack of capacity to sign (e.g., mental incapacity or underage) are grounds for a contract to be voidable.
In summary, understanding the intricacies of contract law, including the components of a contract, valid contract forms, breaking contracts legally, managing disputes, recognizing unconscionable contracts, and the circ*mstances leading to voidable contracts, is essential for anyone navigating the complex landscape of contractual agreements. If you need specific guidance, it's advisable to seek legal advice tailored to your situation.
