How to get out of a Legal Contract? All about Termination Clauses
When parties enter a contract, the goal is to ensure that both parties understand what they are agreeing to, which is crucial for avoiding misunderstandings and disputes. Some core elements of contracts include responsibilities of each party, deadlines, and payment. Another important section of a contract is the Termination Clause.
Termination Clauses set out the rules for parties to exit the contract without breaching it. In a Service Agreement, the Termination section usually lets either party terminate the contract a specified number of days after signing the contract or a specified number of days before a project milestone or deadline. Two common termination provisions include termination for cause and termination for nonpayment. The first provision allows either party to terminate the contract if the other party does not perform its responsibilities set out in the contract. The second provision allows the service provider to terminate the contract if the client does not pay them on time.
Can you end a contract for other reasons?
Although it’s important for Service Providers to maintain a positive reputation and keep their clients happy, sometimes clients can be very difficult to work with. Can a Service Provider end a contract with a client who is difficult to work with? The simple answer is yes.
You can include a provision in your Service Agreement’s Termination Clause that allows you to terminate the contract for other reasons such as: (a) the client becomes difficult to work with; (b) the client harrasses the Service Provider; (c) the client is disrespectful toward the Service Provider, and more.
What if the client is not terrible to work with, but the Service Provider just wants to go on vacation or has other commitments?
As a general rule, we don’t recommend that Service Providers quit without a valid reason. Service Providers can end a contract for a reason not specified in the Termination Clause, but this results in a breach of contract. If a Service Provider breaches an agreement with a client, the client will be entitled to damages or even in some cases, specific performance.
Clients also have a legal way to end a contract for no specific reason: The Cooling-Off Period!
Under the Consumer Protection Act (CPA), clients are allowed to cancel a contract and get their money back under a few conditions. First, the contract has to be for products or services worth more than $50.00 and second, the client must cancel the contract within ten [10] days of signing it.
The cooling-off period doesn’t apply to all contracts, but it does apply to agreements for products or services sold by Online Service Providers when paying in advance for a membership (for example: a coaching or training membership).
If you have more questions, want to draft a termination clause, or you’re not sure whether your termination is strong enough, you can check our Service Agreement or contact a lawyer to help you!
Author Credits
Erin Kasner-Remer is a final year law student at the University of Ottawa and a 2022 EFV Legal Intern. She is interested in Business and Family Law, and can be found exploring new restaurants and cafes. Connect with her on LinkedIn.
Related Articles
My Client won’t pay me! What can I do? All about Collection Agencies and when to Hire One
If you don’t know what a collection agency is, you’re probably lucky and have never had to deal with a client refusing to pay you for your goods or services. A collection agency is a company that anyone, including lenders, creditors, and business owners, can hire to...
The Business of Law: Human or Commodity?
An Opinion Piece by Elena Favaro VianaWhen I was a new lawyer, I spent the initial few months trying to build out my network. I met a gentleman once, whom at the time, I admired and looked up to, and set up a coffee date with him. I did not have a lot of expectations...
Is a Handshake Agreement or Verbal Agreement Legally Binding?
Contrary to popular belief, contracts do not always have to be in writing. In fact, you can enter into a binding contract with someone just by shaking hands!What is a ‘Handshake Agreement’? A Handshake Agreement is an oral contract where the parties agree to the...