How to Terminate a Sale Agreement For a Business
If you are bound by a business sales agreement and wish to terminate it, you should carefully consider your options. While in some cases you will face civil liability for terminating a signed contract, there are situations in which you are entitled to terminate without facing liability. Even if you are not entitled to terminate, the amount of your civil liability may be small enough to make it worthwhile to do so anyway. You will not be held liable for punitive damages simply for terminating a sales agreement.
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Instructions
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Read the agreement carefully to find out if it contains a termination clause. Many sales agreements contain "opt out" clauses that allow either party to terminate the agreement with advance notice of 30, 60 or 90 days. Even if you wish to terminate the agreement immediately, a short notice period could drastically reduce the amount of damages that you will be liable for.
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Check your state's consumer protection laws to see if it allows a "cooling off" period for the sale of real estate or retail consumer goods. If your sales agreement falls within either of these two categories, state consumer protection law may allow you to terminate the agreement without penalty, up to 72 hours after signing it.
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Examine the other party's contractual obligations to see if they committed a breach of the agreement. If the other party committed a serious breach, you will be entitled to terminate the agreement immediately and sue for damages. If the breach is not serious, you may not terminate the agreement, but you may be able to reduce the amount of any settlement. Two common breaches in sales agreements are breach of the implied warranty of merchantability and breach of the warranty of fitness for a particular purpose. These warranties bind the seller even if they are not written into the agreement, as long as the agreement does not specifically disclaim them.
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Determine if the agreement is voidable by referring to the circumstances under which you signed it. If you were a minor at the time you signed the agreement, you may terminate without penalty (the age of majority is 18 in most states, but is higher in some). If you were intoxicated at the time you signed, mentally or physically coerced into signing, or induced to sign based on fraudulent misrepresentation by the other party, then you are entitled to terminate the agreement.
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Contact the other party with a settlement offer (unless any of the above grounds for unilateral termination apply). It is likely that the other party would rather settle for less than he believes his claim against you is worth, than undergo an expensive and time-consuming courtroom battle.
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Tips & Warnings
If your business is selling real estate and the sales contract states that "time is of the essence," you will be entitled to terminate the contract if the buyer doesn't complete real estate closing formalities by the exact date specified in the contract.
If you have grounds for termination of the agreement, record those grounds in a written notice and deliver it to the other party, prior to termination.
