Termination of Service Contract: Everything You Need to Know

A termination of service contract can be initiated as long as it has been determined it is a legal contract.3 min read

A termination of service contract can be initiated as long as it has been determined it is a legal contract. This occurs when two elements exist: mutual assent and consideration.

Causes for Terminating Legal Contracts

For mutual assent to be valid, an offer must have been made and accepted. For consideration to be valid, something of value must have been exchanged. There are a few valid reasons for terminating a service contract. These include:

  • Termination due to the impossibility of performance.
  • Termination due to fraud.
  • Termination due to mutual mistake.
  • Termination due to breach.

Termination Due to the Impossibility of Performance

When "impossibility of performance" is the cause of a termination of a service contract, it means there are circumstances making it impossible for you or the party you signed an agreement with to complete the terms of the contract. An example would be you've placed an order for X number of goods. The day before the supplier is to send the goods, the warehouse burns down and all products, including those you've ordered, are destroyed. This situation makes it impossible for the supplier to fulfill their part of the contract, so it would be legally terminated.

Termination Due to Fraud

Fraud is when a deception or misrepresentation is intentional for the purpose of benefiting monetarily or for personal gain. Termination of a contract due to fraud is a common occurrence. An example of fraud would be an when you've ordered a product, such as ink cartridges for printers, and upon receipt of the goods, you find that all the cartridges were empty. The supplier would be hard pressed to convince anyone that they weren't aware of the faulty goods. Therefore, there are grounds for terminating the contract.

Termination Due to Mutual Mistake

When the parties involved in a contract are mistaken about the facts relating to the contract, this is referred to as a mutual mistake. If the mistake concerns a vital part of the contract, it often results in a termination of the contract based on reasonable grounds. The basis of a mutual mistake is when the terms of the contract have been violated and the result leads to a significant impact on the performance of the contract. With a mutual mistake, neither party involved could have anticipated the mistake would occur.

Termination Due to Breach

For a breach of contract to occur, one party must fail in their performance according to the terms of the contract. When this happens, there is cause for the other party file to have the contract terminated. For the contract to be terminated, the party claiming the breach must show that the failure resulted in a material breach of the terms of the contract.

Canceling a Service Contract

Canceling a service agreement must be done according to the terms of the contract. Otherwise, it can be considered a breach of contract or a broken contract. The statutory law provides consumers with their right to cancel service contracts when certain circumstances apply.

There are several things to do when taking steps to cancel a service contract:

  • Obtain a copy of the original service agreement that you initially signed and any other relevant documents.
  • Review the document and verify that it is the exact agreement you signed and that the date and time are correct.
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