How to Exit a Contract Early
Exit a contract early by exercising a break clause if one exists, negotiating a mutual termination, establishing that the contract has been frustrated, or terminating for material breach by the other party. Each route has different legal and financial consequences.
Last updated: February 2025
Step-by-Step Guide
Review the contract for early exit provisions
Check for break clauses, termination for convenience provisions, or force majeure clauses that may allow early exit.
- •Break clauses often have strict conditions that must be met exactly.
Assess your grounds for early exit
Determine whether you have contractual grounds (break clause), common law grounds (material breach, frustration), or need to negotiate a mutual exit.
- •Document any breach by the other party that could justify termination.
Calculate the financial impact
Review early termination fees, outstanding payment obligations, and any damages you may be liable for if you exit without proper grounds.
- •Compare the cost of staying versus the cost of early exit.
Execute the early exit
Follow the contractual procedure precisely. If negotiating, document the mutual termination in a deed of termination that addresses all outstanding obligations.
- •A clean break agreement should address surviving obligations, final payments, and mutual releases.
Legal Requirements
Under English common law, a party may terminate a contract early for repudiatory breach (a breach that goes to the root of the contract), frustration (an event that makes performance impossible or radically different), or under express contractual provisions. Wrongful early termination can give rise to a claim for damages.
Common Mistakes
Template / Example
When to Get a Solicitor
If there is no break clause and you need to rely on breach or frustration, or if the financial exposure from early exit is significant.
FAQ
Can I exit a contract early if there is no break clause?
You can if the other party has committed a repudiatory breach, if the contract has been frustrated, or if both parties agree to terminate. Otherwise, you may be liable for damages for wrongful termination.
What is the difference between a break clause and termination for convenience?
They are functionally similar. A break clause allows termination at a specified point (e.g. after 12 months). Termination for convenience allows termination at any time with notice. Both are contractual rights that must be exercised according to their terms.
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