Understanding The Forms of contract Termination
Termination of a contract, also called cancellation and discharge, may occur for any of the following causes.
- Mutual agreement
- Cooling-period Rescission
- Lapse of time
- Invalidity of contract
A contract terminates when fully performed by the parties. It may also terminate for:
- partial performance, if the parties agree.
- sufficient performance, if a court determines a party has sufficiently performed the contract, even though not to the full extent of every provision.
An otherwise valid contract can be canceled if it is not possible to perform. Certain personal services contracts, for example, depend on the unique capabilities of one person which cannot be substituted by someone else. If such a person dies or is sufficiently disabled, the contract is cancelable.
Parties to a contract can agree to terminate, or renounce, the contract. If the parties wish to create a new contract to replace the cancelled contract, they must comply with the validity requirements for the new contract. Such substitution is called novation.
Rescission is the act of nullifying a contract. In many states, parties to certain contracts are allowed a statutory amount of time after entering into a contract, or “cooling period”, to rescind the contract without cause. No reason need be stated for the cancellation, and the cancelling party incurs no liability for performance.
Revocation is cancellation of the contract by one party without the consent of the other. For example, a seller may revoke a listing to take the property off the market. While all parties have the power to revoke, they may not have a defensible right. In the absence of justifiable grounds, a revocation may not relieve the revoking party of contract obligations.
Abandonment occurs when parties fail to perform contract obligations. This situation may allow the parties to cancel the contract.
Lapse of time:
If a contract contains an expiration provision and date, the contract automatically expires on the deadline.
Invalidity of contract:
If a contract is void, it terminates without the need for disaffirmation. A voidable contract can be cancelled by operation of law or by rescission.