Getting out of your contract with a vendor


What is a contract? 

A contract is a legally binding agreement between two or more parties. Each contract explains the rights and responsibilities of the parties, including payment, obligations, and methods for dispute resolution. 


Most agreements also contain provisions regarding contract cancellation. However, you may be able to terminate a contract based on factors that aren’t in the written agreement. 


Enumerated termination rights

Many written contracts contain a list of ways each party can terminate the agreement. For example, each party might have the right to cancel the contract whenever they want, so long as they give the other party a certain amount of advance notice. 


For example, if your contract allows you to terminate for convenience with 30 days’ notice, you can get out of an agreement by notifying the other party of the termination and waiting for the end of the 30-day window. 


Agreements may also allow you to terminate contracts if the other party files for bankruptcy, breaks the law, or loses key licenses, permits, or business relationships. If the fallout from insensitive remarks is serious enough for your counterparty, it may be grounds for termination. 


Each contract is different, so check your specific agreement to see if there are any other ways you might be able to terminate the arrangement. 


Breach of contract

You may be able to cancel a contract if the other party fails to uphold its end of the bargain. For example, a franchisor may promise to provide training, support, and business opportunities. 


If the franchisor stops performing—whether because of public backlash or otherwise—you can claim breach of contract and try to terminate your relationship. 


Similarly, a sponsorship agreement might require the sponsored party to act in accordance with the sponsor’s values. For example, Reebok recently canceled its CrossFit sponsorship. While the exact sponsorship cancellation policy hasn’t been disclosed, Reebok might have claimed Crossfit was no longer aligned with Reebok’s image and values. 


In some cases, a breaching party is allowed a certain amount of time—such as 30 or 60 days—to fix the problem. However, when concerning racially insensitive remarks, the offending brand’s reputation is likely to be tarnished for longer than a month or two. 


Fraud, mistake, or misrepresentation 

You might be able to back out of an agreement if the other party lied or otherwise misrepresented a material fact during negotiations. 


For example, in a contract with a food vendor, the vendor might claim that it has the capacity to deliver 1,000 oranges per day. If it turns out that the vendor misled you and only has access to 50 oranges per day, you could terminate the agreement for fraud or misrepresentation. 


If both parties are mistaken as to a material fact regarding the contract, you might also be able to terminate the agreement. Suppose you and another party draw up a contract for the sale of a trumpet owned by Miles Davis. Both parties believe the trumpet is authentic. However, if you both subsequently learn that it didn’t actually belong to Miles Davis, you could undo the contract based on mutual mistake. 


Arguing fraud, mistake, or misrepresentation to get out of a contract is a bit more challenging than the other options mentioned, but you could give it a try if enumerated termination rights or breach of contract aren’t options. You might be able to argue that your counterparty misrepresented themselves as racially sensitive and open-minded, which was a core component of the agreement. 


Failing to renew 

Finally, the simplest way to get out of a contract is to decline to renew. Many agreements last for a certain period, afterward automatically renewing on a monthly or yearly basis until one or both parties decide to exit the relationship. 


Try a variety of tactics 

Try a few different strategies when attempting to end a legal contract with a racially insensitive counterparty. You might simply ask the counterparty if they’ll agree to end the relationship first—perhaps they’ll accept. Otherwise, you’ll need to explore a few of these tactics to see which one will work best for your particular situation.