4 Legal Ways To Terminate a Contract in Tennessee
When you enter into a contract, you expect both parties to uphold their end of the bargain. However, things don’t always go as planned, and sometimes, the other party might fail to deliver, or circumstances could change, making it necessary to terminate the agreement. Terminating a contract, however, isn’t as easy as walking away and forgetting about it. You must do it legally to avoid liability. If you fail to follow the proper procedure, the other party could accuse you of breaching the contract, even if they were at fault. Below, we discuss four legal ways to terminate a contract in Tennessee.
- Termination Due to Breach of Contract
The most common way to lawfully terminate a contract is when the other party breaches it. This can result from a serious breach, also called a repudiatory breach, where the other party fails to fulfill a key obligation essential to the contract. A repudiatory breach is so severe that it undermines the entire agreement, giving you the right to terminate and seek damages.
Additionally, you can terminate a contract due to an anticipatory breach. This happens when one party, through their statements or behavior, clearly demonstrates that they don’t intend to meet their obligations. Sometimes, you may not even have to wait for them to fail to perform; you can take legal action immediately. However, it’s best to approach cautiously because if the breach is minor, terminating the contract prematurely could backfire and put you in breach instead.
- Termination by Mutual Agreement
Another way to end a contract is by agreeing with the other party that it is no longer beneficial and should be formally terminated. In this case, a contract variation is usually drawn up to ensure neither party has a claim of breach of contract. For termination of a contract by agreement to be legally binding, it must include a fresh consideration, a deed of release, and a separate settlement agreement confirming that both parties are satisfied with the terms of termination. In some instances, promissory estoppel may come into play. If one party reasonably relied on the other’s promise in the contract and acted upon it, the court can enforce the termination.
- Termination by Performance
A contract can also be terminated when both parties have entirely performed their obligations or performance is incomplete or defective. For example, if you hire a contractor to install an HVAC system but the system isn’t working, the contractor can be deemed in breach because they didn’t meet a critical obligation and, therefore, may receive reduced payment for partial performance. In such a case, the contract should explicitly state that a specific result must be achieved, and failure to do so gives grounds for termination.
- Termination Due to Frustration or Force Majeure
If an event fundamentally changes the nature of the agreement, such as a natural disaster, a change in the law, or the cancellation of a key event, the contract may be terminated due to frustration. This can happen if the event is unexpected, beyond both parties’ control, and the contract’s core purpose has been entirely disrupted. If the contract includes a force majeure clause, it may specify certain conditions like pandemics, wars, floods, or government action that allow for termination or suspension.
Contact Us for Legal Help
If you need help drafting a business contract or getting out of one, contact our Knoxville business & commercial litigation attorney at Reynolds, Atkins, Brezina & Stewart, PLLC, today to explore your options and ensure you terminate the agreement lawfully.
Source:
casetext.com/statute/tennessee-code/title-47-commercial-instruments-and-transactions/chapter-2-sales/part-6-breach-repudiation-and-excuse/section-47-2-610-anticipatory-repudiation#:~:text=When%20either%20party,1%20(2%2D610).
