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Contracts are the backbone of businesses as they allow stakeholders to build trust with each other. In addition, they are legally enforceable as long they meet the elements of a binding contract. Being legally enforceable means you can have the court enforce a contract if the other party does not follow the terms of the agreement. This also means that the court can help you receive damages for any losses as compensation. Some contracts will have a set contract end date, but others may not. This article will explain the different types of contracts and how you can end a contract. 

Types of Contracts

There are three main types of contracts, and they are all used in different situations. You should consider each type of contract, as some contracts have a higher chance of being legally enforceable than others.

Written

The most common form of contract is a written contract. A written contract is where all the contract terms are collated on a document that all parties to the contract sign. The written contract is popular as it creates a reference point for the agreement. It is also proof that you and the other party have entered into a contract. This means there is a lower chance of a dispute as there is solid evidence of what was agreed to.

Oral

An oral agreement can also be a legally enforceable contract. However, it must meet all the requirements of an enforceable contract for it to be binding. Oral contracts often come into dispute as there is no physical evidence of a contract being agreed upon. This can make it hard for parties to prove that something was agreed to. Furthermore, it can be hard for a court to enforce a contract that they cannot see. Therefore, it is always best to write down a contract so that there is proof and a court can enforce it more easily. 

Implied 

Implied contracts are also common. They are so common that many people do not even realise they are entering into them. Implied contracts are formed by the conduct of the parties and are often used for unimportant matters. For example, when you buy a product at a store, you are entering into an implied contract. Implied contracts do not usually cause many issues. However, if you are doing something commercially significant, it is always best to enter into a written contract. 

Different Ways to End a Contract

There are several different ways to end a contract. The method you choose will depend on your situation. 

Breach

One way that someone can end a contract is through a breach of contract. A breach of contract is where one party does not uphold their obligations or follow the terms of the contract. When a breach occurs, the innocent party to the contract may have the right of termination. However, this also means that they can make a legal claim. They may hold you liable for any loss that they incur due to the breach, and you could suffer legal consequences.

One type of breach is called repudiation. A repudiation is where one party explicitly refuses to uphold a specific obligation. A repudiation is different from an actual breach, where there is a failure to perform a specific obligation at a particular time. Another example of repudiation could be where one party walks away from the contract before the contract end date. Like all breaches, if you repudiate a contract, you can be held liable for any loss incurred.

Expiry

Contracts can also come to an end if they have reached their contract end date. Of course, not all contracts will have a contract end date, but if they do, then you are free from your obligations after that date as enough time has passed.

Consent 

Finally, you can end a contract by mutual agreement through the written consent from your contracting party. If you get permission from them to end the contract, you can cancel the contract, and both parties will be released from their obligations. This is an early termination which means you do not have to wait for the contract end date. However, your contracting party may ask for a termination fee before you can end the contract.

Key Takeaways

Legally enforceable contracts are vital for businesses as they allow you to operate with a high degree of trust. This is because they allow the parties to receive compensation if one party fails to perform the contract terms. There are three main types of contracts, but it is always best to form a written contract if possible. This is because a written contract shows exactly what you and the other party have agreed to. In addition, there are multiple different ways to end a contract. However, to avoid any liability, you should either wait for the contract’s expiration or receive consent to end the contract by mutual agreement.

For legal assistance with managing your contracts, LegalVision’s experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions

Can I breach a contract and avoid liability?

No, your contracting party will have the right to sue you for damages if you breach the contract.

Can my contracting party charge me to end the contract?

Yes, they can charge a fee for early termination. 

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