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Contracts can end in several ways, and it’s not always simple to do. Knowing the different reasons contracts end can help you:

  • plan and make better decisions
  • avoid surprises that could disrupt your finances or business activities
  • reduce legal risks
  • manage costs and budget for liabilities
  • maintain relationships with clients and suppliers.

Here are some of the common ways you can end a contract.

Both parties complete their obligations

When both parties have done what they agreed to do, the contract ends by performance. 

Check your contract for any obligations you or the other party will have after the contract ends. For example, the contractor might need to keep some details confidential or repair faults under warranty.

Confirm that both you and the other party have met all obligations before ending the contract. If you're unsure, get legal advice.

Example of a contract ending by performance

Effie has a contract with Rekall Ltd to do a one-off delivery of catalogues to their customers for a fee of $1,000.

Effie distributes all the catalogues and Rekall Ltd pays her. The contract ends because both parties have done what they agreed to.

After the contract ends, Effie must continue to follow the contract’s confidentiality clause. This is to prevent Rekall Ltd’s competitors from gaining access to marketing materials or client lists.

You agree to end the contract early

A contract can end by agreement when you and the other party decide to end it before the work is complete. 

Put the agreement to end the contract in writing. This protects you and the other party and avoids confusion. 

Before ending the contract early, consider talking with a legal adviser to understand any risks. For example, tax or regulatory implications.

Something unexpected happens

Sometimes you can end a contract by frustration. This is when events outside either party’s control make it impossible to carry out the contract. For example, a natural disaster destroys the venue booked for an event. Neither party is at fault, but the contract can’t continue.

Check whether frustration applies before assuming your contract has ended. This legal concept is complex and may still leave you with obligations. Get legal advice to understand your position and avoid mistakes.

One party ends the contract for their convenience

Some contracts have a clause that lets one or both parties end the contract for any reason, even if the other party hasn’t done anything wrong. This is called ending by convenience.

These clauses are common in contracts for:

  • government procurement
  • construction
  • technology supply
  • long-term service arrangements.

Check your contract to see:

  • if it has an end by convenience clause
  • how much notice each party must give to end the contract
  • what money is payable if the contract ends.

Consider getting legal advice before you act.

End a contract because of a breach

An actual breach happens when one party doesn't meet their essential obligations under the contract. This could include failing to provide goods or services, missing deadlines or not meeting agreed standards.

Another type of breach is an anticipatory breach. This is when one party indicates they won’t or can’t fulfil the contract terms by the deadline.

Example of breaches

Actual

Simon runs a catering business and signs a contract with Rekall Ltd to supply food for a series of events. Rekall Ltd cancels several bookings without notice.

Simon checks his contract and sees that consistent cancellations breach the agreement. Simon gets legal advice and decides to end the contract.

Anticipatory

Rekall Ltd hires Maxine to create a logo for its new business. A week before the deadline, Maxine tells Rekall Ltd that she has taken other work and won't complete the logo on time.

Rekall Ltd checks the contract and sees that this refusal to produce the logo breaches their agreement. They get legal advice and decide how to move forward.   

Understand when you can end the contract

You can only end a contract if the breach is serious. This usually means the breach:

  • affects the core purpose of the contract
  • causes significant loss or damage
  • shows the other party won't meet their obligations.

Check your contract for any terms that explain what counts as a serious breach. Not all breaches give you the right to end the contract – some may only allow you to claim damages.

Take the right steps

Before you end a contract for a breach:

  • review the contract carefully
  • assess how serious the breach is
  • get legal advice to understand your rights and risks.

If you end a contract without a valid reason, the contract may still be in effect. You might need to meet your obligations, and the other party could take legal action against you.

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