Can I Terminate My Contract? A California Attorney Explains
- Yakup Sari, Esq.
- Oct 9
- 5 min read
Updated: 6 days ago
“Under California law, you can terminate a contract only if you have legal grounds — such as breach, rescission, or force majeure.”
As a business attorney, one of the most common questions I receive is, “Can I get out of this contract?” The answer depends on why you want to end the agreement and on the language of the contract. A contract is a legally binding promise; unilaterally ending it without a valid reason can expose you to lawsuits and damages. Below I outline the most common ways contracts end under California law, how termination clauses work, and what consequences you should expect if you end an agreement prematurely.
1. When a Contract Ends Naturally: Completion of Performance
The easiest and most common way for a contract to end is simple — both sides do what they promised. Once that happens, the agreement naturally expires.
California recognizes the doctrine of substantial performance, meaning that a contract may be considered complete when the essential obligations are satisfied. Minor defects may still result in a claim for damages, but they usually do not prevent the contract from ending. Before walking away, review the contract to confirm all major tasks and payments have been fulfilled.
2. When the Other Side Messes Up: Termination of the Contract Due to Breach
If the other party fails to perform their end of the deal, you may have the right to terminate the contract. But not all breaches justify cancellation. Only a material breach — something serious enough to defeat the whole purpose of the agreement — allows you to walk away.
Example: A contractor abandons your project halfway through.
Not an example: The contractor finishes a day late. A minor delay or a small defect typically entitles you to damages, not termination.
Most well‑drafted contracts define what constitutes a material breach and require you to provide written notice and an opportunity to cure before termination. If you declare a breach when none exists, you could become the breaching party and owe damages.
3. Mutually Agreeing to End Things: Rescission
Sometimes both sides agree that it’s best to part ways. Under California Civil Code §1689, you can rescind (cancel) a contract if everyone consents, or if the contract was signed under fraud, mistake, or duress.
Rescission means both parties return what they received — it’s as if the contract never existed. Usually, this is done through a written termination agreement that also covers ongoing obligations like confidentiality or non-disparagement.
If you go this route, make sure the rescission is documented properly and that all parties understand what happens next.
4. Built-In Exit Options: Termination Clauses
Many contracts include termination provisions that explain exactly how and when you can end the agreement. Common examples include:
Notice periods: You must give a certain number of days’ notice before ending the contract.
Termination fees or liquidated damages: A pre-set payment if one party ends the deal early.
Termination for convenience: Allows one party (often a property owner or buyer) to end the contract for any reason.
Survival clauses: These spell out which obligations continue after termination, like confidentiality.
Because these terms are part of the contract itself, courts usually enforce them. But you must follow the exact notice and timing requirements — even small mistakes can cause problems.
5. Ending for Business Reasons: Termination for Convenience
“Termination for convenience” clauses appear frequently in construction and service agreements. These clauses let an owner or contractor stop the work for reasons unrelated to the contractor’s fault—for example, if financing falls through or the project is no longer needed. The owner must then pay the contractor for work performed plus a small profit, but not for lost future profits. Without such a clause, terminating a contract without cause could make you liable for the contractor’s lost profits
However, this right isn’t unlimited. The implied covenant of good faith and fair dealing means you can’t use the clause just to avoid paying what’s owed. Courts may step in if a termination looks like an abuse of discretion or was done in bad faith.
Always have a legitimate reason and document it carefully.
6. When Life Happens: Force Majeure, Frustration, and Impossibility
Sometimes, things happen that make it impossible or unfair to keep performing. California recognizes these main doctrines for this:
Force Majeure: A clause in the contract that excuses performance due to extraordinary events like natural disasters or government shutdowns.
Frustration of Purpose: When an unforeseen event wipes out the main reason for the contract — for example, a lease for advertising space becoming useless after a government blackout order.
Impossibility: When performance becomes impossible due to events outside your control, and you didn’t assume that risk.
These doctrines are applied narrowly, so the court will first look at your contract’s wording to see if it covers the situation.
7. What Happens After You Terminate
Ending a contract is rarely a clean break. Depending on the situation, you may face several consequences:
Restitution: You might have to return what you received.
Damages: The other party may claim compensation for losses.
Attorney’s fees: If the contract allows, the winning side may recover legal costs.
Surviving obligations: Duties like confidentiality or indemnification might continue even after termination.
And remember — a wrongful termination, such as ending a contract in bad faith, could make you liable for the other side’s lost profits.
8. Final Thoughts: Don’t Terminate Blindly
Contract termination isn’t a one-size-fits-all situation. Whether you’re a homeowner, business owner, or contractor, the safest path is to review your contract carefully and get legal advice before acting.
Ending a contract the right way can save you thousands of dollars — and a lot of stress.
If you are considering ending a contract—or you have received a termination notice—consult a California attorney to review your situation. At Sari Law Firm, we help clients protect their rights, contact us today to schedule a free consultation. Let’s make things right.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Every case is different. If you believe your rights have been violated, consult a qualified California attorney to evaluate your specific situation.
FAQ
1. Can I terminate a contract for any reason?
No. You need a valid legal reason, such as a material breach, mutual consent, or a contract clause allowing termination.
2. What happens if I terminate a contract without cause?
You could be liable for breach and owe damages, including lost profits or termination fees. Always review your agreement before acting.
3. What is a termination for convenience clause?
It allows one party to end the contract for business reasons — but must be exercised in good faith and according to the notice terms.
4. What is the difference between rescission and termination?
Rescission cancels the contract as if it never existed; termination ends the agreement going forward but may leave past obligations intact.
5. Can I cancel a contract because of unforeseen events (e.g., pandemic)?
Possibly. Force majeure, frustration of purpose, or impossibility may apply — but courts interpret these narrowly based on contract language.
6. What should I do before terminating a contract?
Review the agreement with a California attorney, provide required notice, document reasons, and evaluate potential liability.
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