How Do I Get Out of a Contract?

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If you regularly enter into contracts with clients or customers, then you’ll want to listen to this Legal Quickie episode before you swipe right on your next contract.

We’re talking about why contracts are just like dating, how to think about your contracts just like you would any other relationship, and what terms you might include in your contracts to make sure you have a way to “break up” with your (nightmare) client.

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HERE’S A TRANSCRIPT OF THE EPISODE

[Intro Music] This is Office Talk with Annette Stepanian.

Annette

Hey guys, Annette here and I’m back with another Office Talk episode. Before I dive into this week’s legal quickie question, I wanted to share a few housekeeping items. The first is next month, I’m going to be doing a ton of webinars for you guys. So I have collaborated with some folks in the creative industry – folks who I totally admire and respect. And so we’re putting our heads together and doing some webinars for folks in the wedding planning industry. If you’re interested in getting your website in tip top shape, if you’re interested in hiring and what kind of like the tax implications are as well as the legal implications, it’s a whole bunch of stuff. So if any of these things, pique your interest, make sure you’re signed up on my email list over at annettestepanian.com/join. Because I’m going to be sharing all the details about those webinars in November, if you’re on my email list. So make sure to get on that list.

Also, remember that you can save $50 on the setup your startup training, by using the code office talk. That’s all one word at checkout. This training is something that I put together because I was getting so many questions from folks who were interested in starting a business but didn’t really know how to do it from a legal perspective. And I know when I was starting my own business, my jewelry business, it was like – why is this information and all over the place, I wanted one place that would just tell me what I needed to do. Break it down in simple terms, so that I could just get it done. So that’s what the training is all about. If you use the code office, talk through October 31 of 2016, you can go ahead and get $50 off that price. And if you’re on the go, you’re at the gym, or maybe you’re vacuuming right now, don’t worry, you can get all the links to all the stuff in the show notes. You can find that over at annettestepanian.com/podcast/9.

Oh, and one more thing. I totally forgot. But I am so excited about the guests who are coming on the show. We are going to be continuing to interview different entrepreneurs. But I have some of my friends who are folks in the legal industry. Yes, lawyers do have friends.  They are going to be coming on the show. And they are going to be dropping some major knowledge bombs on us all about hiring or licensing, whatever the topic is that they practice. These are folks who are in the day to day in the trenches, litigating this stuff, negotiating this stuff. So if you’re not already subscribed to the show, go ahead and click on over to your iTunes account or a Google Play account. And just hit subscribe. There are some really good guests with great information to share coming on the show in the next couple of weeks. And I don’t want you to miss it.

Okay, now that that’s all out of the way, let’s dive into this week’s legal quickie question. It’s all about how the heck do I get out of a contract? Before I answer the question, let’s give it some context. Now you don’t always want to get out of a contract and breach your responsibilities that you have agreed to under a contract. However, what I see happening a lot when I review contracts is folks who are running a business and sending out contracts to their clients. They’re not including this one important thing, which is a termination clause.

Oftentimes, if there is a termination clause, it’ll address how the client can terminate a contract. But it won’t address how you as a business owner can terminate a contract. Oftentimes, we enter into a relationship with a client, we are so excited, we are just full of rainbows and butterflies and unicorns, and confetti and all that great stuff. We think we have met the client of her dreams. And then we start working with them. And they are a complete nightmare. I’ve heard horror stories of clients physically assaulting their, the folks that they hire, which is insane to me that anybody would ever behave that way. I have heard stories of you know, disasters of people calling, you know, 24 seven and expecting you to be available all the time, and just being completely completely unreasonable. I want you guys to be really prepared for any scenario. Sometimes we go into relationship and contracts are just like any other relationship. Oftentimes, it’s like just like dating, right? You go into it, you’re excited, you know, this, this person looks really great on paper. You guys have hit it off, and then you start dating them and you realize, “Oh, my God, they just have these annoying habits and I can’t be with them.” Or maybe your values don’t align, whatever it is, and you want a way to get out of that relationship gracefully, but also satisfying your obligations.

What I want you to do is go right now and take out your business contracts. The ones that you send out to your clients when they hire you. Go on, go do it. You can put this on hold. I’ll wait. I’ll be here. I promise If you’re driving, and you can’t do it right now, or whatever the reason is, make a note to pull up your contract and take a look at the termination clause, or sometimes it’s called a cancellation clause.

I want you to read through it and think about, does it indicate how a client can terminate the contract? Does it indicate how you as a business owner can terminate a contract? does it indicate what conditions need to be satisfied in order for either the client or you to terminate a contract? For instance – does it say that certain notice needs to be provided? Maybe you have to give 14 days written notice? Do you have to give a reason why you’re terminating the contract? Then I want you to think about what happens after termination. Look at it both from the perspective of the client, as well as from your perspective. So if a client terminates the contract, what does the client have to do? Do they have to maybe pay you for any outstanding services? And then what do you have to do in that event? You know, is there certain materials, you’re going to return to them? Is there certain information, you have to disclose to them? And then also look at it from your perspective, in the event that you terminate the contract? What is it that you owe the client? And when you request to terminate the contract? Do you? Are you going to return unearned fees? Are you going to help them find a new service provider? And what does the client owe you in the event that you terminate a contract?

When you’re designing a contract, again, just like dating, I want you to think about it as a relationship. There’s usually a beginning, a middle and an end. And oftentimes we forget about the end because we hate breakups. We don’t want to think about the reality that something may not go well. So we just kind of ignore it. We always focus on kind of the beginning, when things are good, you’ve gotten this great client, but walk through your contract as if it were a relationship. What do you have to do in the beginning? What are the terms of that engagement? Are you communicating what the expectations are? Are you indicating the client can expect this from me and my client, I expect this from you.

Then I want you to think about what happens in the middle of the relationship, you know, things are going along, you’re doing the work, they’re paying you all that good stuff, what are certain rules that you need to have in place in order for this relationship to work successfully?

And then the end, what happens when a relationship ends? Sometimes the relationship ends because it’s just the natural course of things -you have provided the work, you’ve performed the services, the client has paid you the project is done. But sometimes it’s not so pretty, because like I said, in the beginning, sometimes things just get nasty. Sometimes a client doesn’t fulfill its obligations, you know, they’re not paying you they’re not being responsive. Or maybe a client just doesn’t like you. I’m sorry to break it to you, but not everybody’s gonna like you. And you want to address that in your contract. So it’s clear and you’re not in a situation where you don’t know what to do next.

So with that said, I hope you are making a note to pull out your contracts really take a close look and play out those scenarios. What happens if I want to get out of a contract? Does my contract indicate what I can do in this situation? If not think about what kind of cancellation or termination clause you could include in there just to cover a situation where you and your client need to break up.

Thank you so much for being here and I’ll talk to you later.

[Outro Music]