Guide to Getting Out of a Contract in the U.S.

So, you signed a contract but now you regret it? It happens to the best of us. Does it mean you are stuck in the agreement forever and must do exactly as it says? Not necessarily.

Of course, your options depend heavily on the specific language of the contract, as well as the actions of you and the other party. So your best bet is to consult with a consumer lawyer, business lawyer, or civil litigation lawyer about your options. Here, we will give you general information about several potential pathways to bow out of contractual obligations.

There are three big questions to ask yourself when thinking about how to walk away from a contract:

  1. What does the contract say?
  2. What does the law say?
  3. What are the practical concerns and power dynamics?

Be sure to check out our Guide to Exercising Your Rights for more information about lawsuits, etc.

1. Interpreting the Contract

What if I have a termination or cancellation clause?

If so, read it carefully. If it is at all ambiguous, or you are unsure what it means, discuss with a lawyer.

If it says you can get out of the contract by paying a cancellation fee or termination fee, it may be worth it to simply pay the fee and be done with it.

Can I (or the other party) get out of a contract due to an unforeseen event?

Many contracts have an Act of God aka Force Majeure clause, which means that if some kind of catastrophe, disaster, or other extraordinary event, such as war, pandemic, etc. occurs that makes the contract impossible, both parties are excused from performing their obligations. Yes, this almost certainly includes COVID-19 (Coronavirus).

Even if the contract does not have this clause, the doctrine of impossibility means that the parties may be excused from performance.

This would mean, for example, if you have a contract for an event, and you paid a deposit, even a “non-refundable” deposit, you can likely get that deposit back if the event cannot be held.

2. Laws Outside the Contract

Is there a Cooling Off period?

There may be a cooling off period by law that is applicable to your specific transaction. These are often referred to as grace periods or cancellation periods or even buyers remorse periods.

The FTC Cooling-Off Rule gives you 3 days to cancel certain “door-to-door” sales made at your home, workplace, or dormitory, or at a seller’s temporary location, like a hotel or motel room, convention center, fairground, or restaurant. But there are exceptions. See more at our Guide to Cooling Off Periods in the U.S.

Many states also give you the right to cancel certain types of transactions within a specified time period. These often apply to transactions like insurance contracts, gym memberships, loans, or contracts made with a door-to-door sales person.

We have a guide to Cooling off periods in California.

What are legally valid reasons to cancel or void a contract?

You may have a right to cancel or get out of a contract if one or more of the following applies:

  • the other party lied about a substantial aspect of the transaction: legally known as misrepresentation, fraud, or unfair or deceptive business practices.
  • you gave consent by mistake or under extreme pressure: the legal terms are fraudulent inducementundue influence, and duress.
  • the agreement is extremely unfair or one-sided, or the way they got you to sign the agreement was very unfair: legally known as the unconscionability doctrine.
  • the agreement falls through for some reason not that was not your fault: this involves the doctrines of impossibility or impracticability.
  • you are a minor (person under 18): A person under 18 years old can simply cancel, void, or disaffirm any contract they sign, at their discretion.

These reasons may make the contract voidablerescindable, void, or null, which are legal ways of saying the contract can be ripped up or unenforceable. If you are planning to rely on one or more of these reasons, you will generally need to have quite a strong case, and be able to prove your accusations.

What about bankruptcy?

An extreme option for getting out of a contract is to file for bankruptcy. If you file for bankruptcy, you are automatically protected from further collections efforts by most creditors.

NOTE: Many types of debt can be discharged through bankruptcy, although many types cannot (including student loan debt). There are serious consequences to filing for bankruptcy and if you are considering doing so, you should discuss with a lawyer.1U.S. Code, Title 11, Section 362

3. Practical Concerns in Getting Out of a Contract

Consider practical steps and pressure tactics

Sometimes even more important than whether the law itself supports your goals is whether you can effectively employ certain strategies. The most obvious but sometimes overlooked first step is to simply ask the other party whether they will release you from the contract. Many people are too intimidated to do this, or assume it won’t work, but you may be surprised.

If you are in a position which the general public may sympathize with, you may want to tell your story to the media. A good story telling your side of the story may put enough pressure on the other party to bow to public pressure.

What are the possible consequences of breaking a contract?

The options discussed above are ways to make a kind of clean break so that you are legally off the hook. Assuming one or more of the options works for you, then you would be within your rights to walk away from any contractual obligations, or have your obligations reversed (e.g. get a refund). Keep in mind that you may have to sue, or you may have to fight off a lawsuit, in order to clean the slate.

However, if you’ve run out of options for legally getting out of a contract, you may consider breaking your agreement by simply not fulfilling your obligations, known as breaching the contract. This could potentially be a viable solution if you haven’t yet paid for a product or service, and you haven’t yet received it. In this case you could just not pay, and tell the other party that you refuse to pay.

This course of action is certainly risky, since you have most likely violated the agreement and the other party could sue you for breach of contract. But maybe they won’t bother suing you. You should definitely discuss with a lawyer before deciding on this path.

Further Resources

Guide to Exercising Your Rights

If you need help getting out of a contract, you should contact a lawyer. Depending on what type of contract it is, you may want to reach out to a consumer lawyer, business lawyer, or civil litigation lawyer.

References[+]

Share the Legal Info With Your Friends: