Do I Have Grounds to Get Out of a Contract?

As a general rule, contracts are binding, and a party cannot just unilaterally cancel a contract. 

And here comes the "But..."!  Below is a non-exhaustive list of ways to defend against, rescind or terminate a contract.

  • No contract - if there was no agreement reached, then there is no contract.  For a valid contract, there must be not only an offer but also acceptance and consideration.  For example, John LLC offered Kate Inc. a container of COVID-19 tests for $1 a piece.  Kate Inc. counteroffered $0.80 a piece.  There is no contract for $1 a piece because Kate has not accepted John LLC's offer. 
  • Agreement to terminate.  Parties may agree to terminate the original agreement. This is usually possible in the beginning stage when neither of the parties invested or relied on the other party.  However, even at later stages, parties may choose to terminate an agreement.  But, of course, the agreement must be mutual.
  • Failure of a condition - when parties condition the contract on a certain event (for example, buyer's obtaining financing for the purchase of a house), and that even has not happened, then the party has no obligation to go forward with the contract.  However, whether there was a condition in a contract or not depends on the contract language and its interpretation.  And remember, a condition may be waived.
  • Mistake - if both parties mistakenly assumed important information or if one of the parties should have known about the other party's mistaken belief. 
  • Fraud - if there is fraud involved, the party may seek to void the contract. 
  • Duress - if duress was involved, then the party may seek relief from the contract.  But economic hardship is usually not duress. 
  • Material breach of contract - if one party has breached the contract, then the other party does not have to perform its part of the contract.  But the breach must be material.
  • Illegal contract - if a contract is made in violation of the law.  For example, the sale of drugs or stolen things.  However, if there is any portion of the contract that is illegal and can be severed from the rest of the contract, it may save the rest of the contract from being void.  For example, even if a non-compete provision is held illegal in the sale of a business contract, the court may still hold that the rest of the contract is valid.
  • Lack of capacity - if a party had no legal capacity to make an agreement.  For example, if a 5-year-old buys a car.
  • Impossibility - if a party cannot perform, and neither party assumed the risk of such impossibility. 

There may be many other defenses to contractual claims.  They are factually sensitive.  One should consult with an attorney to determine possible options. 
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