A valid contract is legally binding, but what if you want out? We consider legal means for exiting a contract, with or without an exit clause.
9 February 2023 · Helen Ueckermann
A valid contract is legally binding, but what if you want out? We consider legal means for exiting a contract, with or without an exit clause.
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A contract, in basic terms, is an agreement between two or more people who promise to perform in accordance with it, says Gerhard van der Merwe, senior associate at Trudie Broekmann Attorneys.
Senior legal advisor Nico Geldenhuys notes that, while some contracts are in writing and signed, most don’t need to be.
“Only a few types of contract require any formality - for instance, the sale of land or an antenuptial agreement,” Geldenhuys says. “For other contracts, it’s sufficient that both parties have a mutual understanding that they intend the agreement to be legally binding.”
Common examples of contracts include lease agreements, employment contracts, and gym memberships.
Under ordinary circumstances, a contract can only be lawfully cancelled if the parties mutually agree to it, or if the contract contains a clause entitling a party to cancel if specific requirements are met, says Geldenhuys.
A cancellation clause can be reciprocal or non-reciprocal, allowing both, or only one of the parties to cancel, depending on what is agreed during the negotiations.
“It’s a good idea to include such a clause,” Van der Merwe says. “If a contract does not include a cancellation clause, or the clause imposes a cancellation fee, it’s reason for pause - and to obtain legal advice from an attorney.”
Geldenhuys says the following are examples of conditions you may find in a cancellation clause.
The consumer protection act (CPA) invariably allows a consumer to exit a contract that falls under its auspices, provided that they give reasonable notice, Geldenhuys says. The supplier, in this instance, is also entitled to impose a reasonable penalty. In the case of cell phone contracts, this may comprise all subscription fees for the remaining term of the contract.
As an important aside, the CPA prohibits suppliers from automatically renewing contracts that are about to expire.
“Once the initial term ends, the contract may only endure on a month-to-month basis, unless the consumer expressly agrees to a new fixed-term period,” Geldenhuys notes.
While it may be wise to seek legal help should you wish to exit a contract, Geldenhuys says it is possible to cancel on your own, if you observe the following steps.
Terminating a contract can be tricky for a layperson, says Van der Merwe. Seeking the advice of an attorney could mean the difference between success and failure.
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