Laws on Contract Termination

Contract Termination By Completion of the Contract Terms

• A contract can be terminated when each party has performed its duties pursuant to the terms of the contract. In such an instance, the contract terminates as a matter of law.
  
  

Contract Termination By Agreement

• A contract can include provisions whereby the parties agree in the contract itself that the contract terminates upon the occurrence of a specific event. For example, there could be a contract for one party to use all the gas in a tank. In such an instance, the parties can agree that the contract will terminate when all the tank is empty.
  
  

Contract Termination By Inability to Perform

• A contract can be terminated when something unforeseeable occurs that prevents the parties from following through with the contract. This situation is referred to as "impossibility of performance." For example, parties can agree to the sale of a house from one party to another party. Thereafter, the house burns down. As a result, the parties cannot continue with the real estate transaction contained in the contract and thus, the contract is terminated.
  
  

Contract Termination by Breach of Contract

• A contract can end when one party breaches the terms of the contract. Such a breach can occur in one of several ways. First, where a party fails to perform as agreed upon in the contract, there is a breach of contract. Moreover, one's failure to abide by the terms of the contract constitutes a breach of contract. Additionally, one party can do something to prevent the other party from performing his or her duties under the contract.
  
  

Contract Termination By Fraud

• A contract can be terminated by what is referred to as "fraud in the inducement." Fraud in the inducement occurs where a party intentionally misleads the other party into entering the contract. For example, a party lies about the subject of the contract and the other party relies upon the statement and agrees to the contract. This misleading action can terminate the contract.
  
  

Remedies for Contract Termination

• If a contract has been terminated, a party has legal recourse against the party in breach of the contract. At this point, one should review the contract to check whether there are any notice requirements wherein one must notify the breaching party as a prerequisite to filing any claims or suits. The aggrieved party may file a law suit in civil court where the party may seek, among other items, monetary damages. In such a case, one should consult an attorney in order to review what rights one has in pursuing legal action.