It is surprising how many legal ways there are to break an agreement once you have signed it. I have set out a selection of these below. It is not meant as a checklist for those who are seeking to avoid their legal obligations, but it may shed light on and inform some presumptions about the legal efficacy of agreements. Needless to say, any particular situation should be considered by a qualified lawyer having been properly instructed.
The first and most obvious example of legitimate breaking of an agreement is if the other parties to that agreement consent to the break. There may be good reasons why they would do so and, if so, it would be advisable to record that consent in writing and, depending on the circumstances, to insist that it be irrevocable.
The second is to break an agreement and to accept that there are consequences of such breach and be prepared to accept these consequences. In the franchise context, this might mean that a franchisee breaks the agreement with the franchisor but is prepared to pay whatever compensation is provided for either under the general law, or specifically under the contract.
A third category of legitimate break is if the person wishing to break the contract can show a repudiatory or fundamental breach by the other party. The acceptance of a repudiatory breach by the innocent party brings the contract to an end and can result in the innocent party recovering damages to put it in the position it would have been in if the contract had been performed as intended.
You are also legally able to break an agreement if it is only, for example, a gentlemen’s agreement or is otherwise not binding. It might also, for example, be an agreement to agree. Many agreements comprise hybrids of legally enforceable obligations and those which are included in the text to direct people’s minds to what else needs to happen, but are not always specific enough to hold the parties to legally binding obligations.
You can also break an agreement if the breach is not material and no consequences flow from it. So in many situations agreements are being broken all the time, but the way in which they are being broken is not fundamental to the operation of the contract.
Another situation is where external conditions force a breach of contract. Confidentiality commonly provides for someone to be permitted to disclose what would otherwise be confidential information if they are legally required to do so by a court order. It is best not to rely on the general law in this regard and to make sure that the contract is specific about what is permitted and what is not.
If an agreement is illegal, then it is not enforceable and you can break it without legal sanctions. Also, if an agreement has restrictions that are too broad, which we see in the case of restrictive covenants that are drawn too widely or for too long. In those circumstances you can avoid those restrictions without sanction. The uncertainty of those situations is, however, irksome and it is not until you actually go before a judge that you will finally know whether or not they are enforceable.
Commonly, agreements provide for parties to avoid legal liability if there are situations which sit beyond the control of one or both of the parties in cases of what is known as ‘force majeure’. That is commonly provided as an example and expressly in contracts where elements that are beyond the control of the parties prevent performance.
Liquidators have powers to disclaim onerous contracts which enables them to break agreements in that sense. Furthermore, where contracts are entered into between businesses and consumers, legislation may provide a get-out for the consumer if any of the terms in the contract are unreasonable.
It is important to distinguish between provisions that make a contract void and those which only make it voidable. Certain defects of documentation within the corporate sphere can mean that agreements fall into either of those categories. For example, if resolutions are passed incorrectly within a company, then this could make contract void or voidable, as the case may be.
Mistake is a situation where, in certain circumstances, the parties can avoid the contract. There are various different categories of mistake and it is a topic all of its own, but suffice to say there are situations in which particular types of mistake can lead to parties being able to avoid contracts.
The question of signing is interesting, because if the signatory lacks power to sign the agreement, then again that may make the agreement void or voidable.
As you will have seen from the above discussion, it is very wide and encompasses a number of different areas of law and legal practice, each of which merits analysis of its own.
If you have any queries relating to this on which you would like further advice, please contact me using the details below.
Both Mark Lello and Parker Bullen LLP disclaim any responsibility for any actions or omissions arising as a result of anything mentioned in this article. We would be pleased to provide detailed advice on request and in accordance with our usual terms should anything in this article or otherwise occur to you on which you would like further guidance.