Identifying Reasons to End the Contract
Ask if you can be let out of the contract. You can always end a contract if both sides agree. Before terminating the contract on your own or threatening to sue, you might want to ask if the other side will let you out of your contract. You can ask by writing a letter. Explain why you want to end the contract and why it might be mutually beneficial for both of you to end the agreement. If you are feeling generous, you could also offer to pay a small fee to end the contract. If the other party won’t agree to end the contract, then you need to find legal reasons for ending it on your own. In particular, you will need to identify how the other party failed to fulfill its obligations.
Find your broadcast contract. You need to read the contract and understand its terms. The contract tells you what you can and cannot do. It also should tell you the expiration date. If the contract is set to expire, you don’t need to renew it. Look for your copy of the contract by going through your papers and filing cabinets. If you can’t find a copy, then contact the other side and ask for a copy.
Read the termination clause. Each contract should explain how either side can end the contract. This will usually be called the “termination clause.” Generally, termination clauses allow you to end a contract before the expiration date in the following circumstances: The other side fails to perform an obligation under the contract. This is called a “breach” or a “default.” You usually must notify the other side in writing of the breach. You choose to end the contract early and the other side doesn’t object.
Identify the other side’s obligations. If you want to end the contract before the expiration date, then you need to identify a “breach.” The other side “breaches” the contract when it doesn’t perform its obligations as spelled out in the contract. For example, a typical clause in a sports broadcast contract obligates the broadcaster not to play political commercials or advertisements for alcoholic beverages during the broadcast of the game. Go through the contract and find all of the other side’s obligations. Use a highlighter. Check if the other side has fulfilled every obligation under the contract. If the other side has failed to perform its duties, then you might be able to terminate the contract on your own.
Get evidence of the breach. You will have a better chance of ending the contract early if you have proof that the other side breached the contract. You should immediately begin gathering proof of the breach. For example, the broadcaster of a sporting event might have used political advertisements or advertisements for alcoholic beverages. These advertisements may have violated the broadcast contract. If so, get video of the broadcast and the commercials. Also hold onto communications. The other side might have told you that it doesn’t intend to honor the contract. If you have an admission like this in writing, then preserve the email or letter. You can treat this kind of admission as a breach.
Meet with a lawyer. To fully understand your rights to ending the contract, you should meet with an attorney. Although you don’t necessarily need to hire the lawyer, at a minimum you should consult with one. You can find a lawyer by contacting your state or local bar association and asking for a referral. Once you get a referral, you should call and schedule a consultation. At the consultation, you should discuss whether you have grounds for ending the contract early. Not every breach or default is sufficiently serious to allow you to terminate the contract. Only an experienced lawyer can advise you. Also give some thought to hiring the lawyer. Ask about his or her fees. The other side might hire a lawyer, and you don’t want to be at a disadvantage by representing yourself.
Sending a Termination Notice
Set up your termination notice. If the other side won’t voluntarily let you out of the contract, then you need to send a letter to the other side stating that you are ending the contract and explaining why. You can draft the letter on your own and show it to an attorney to review, or you could have your lawyer write it. You should set up the letter like a business letter. If you have letterhead, then use that as well. Remember to include the date. You are creating a record of when the other party was put on notice that it was in breach of the contract.
Identify the breach. You need to be specific about how the other side has breached the contract. If possible, copy the applicable contract provision. The other party might have breached the contract in the following manner: Refused to perform. For example, if a broadcaster refused to broadcast a game, then it has probably breached the contract. Stated it will not perform. The other side might have told you that it intends not to follow the contract. You can treat this statement as a breach. Made it impossible for you to perform. For example, a sports team might have refused to play a game. Since its refusal to play has made it impossible for you to broadcast the game, then you can claim that your contract was breached.
Propose a resolution to the dispute. You should also state in your letter how you want the breach resolved. Generally, you can give the other party a chance to “cure” the breach. Alternately, you could end the contract. If you want to continue with the contract, then you should give the other side a chance to cure. For example, the other side might have broadcast an event but not have paid you. You can give them a chance to cure the breach by sending you payment. Your broadcast contract should explain how much time the other side has to cure the violation. Often, you are given 30 days. You can also terminate the contract without giving the other side a chance to cure. Realize that you are taking a risk by doing this. The other side might sue you in court. However, it might not be possible to cure the violation. For example, if you had a contract to broadcast three events and the first event wasn’t held on the scheduled date, you can’t go back and cure that violation.
Mail the notice of breach properly. Your contract should contain a notice provision. This clause will tell you how to provide notice to the other party if it is in breach. For example, the other party might want to be notified in writing at a certain address. Be sure to follow the exact method stated in the contract. If you don’t, then the other side could argue that it didn’t receive proper notice. If you mail the notice, then be sure to mail it certified mail, return receipt requested. Hold onto the receipt as it serves as proof that the letter was received.
Negotiating a Settlement
Be open to negotiation. After you send the termination letter, the other side might contact you to negotiate some sort of settlement. You should seriously consider doing so. The purpose of negotiations is to come to a mutual agreement that benefits both sides. By reaching an acceptable agreement, you can preserve your business relationship and do business with each other in the future. Another benefit of negotiations is that you can avoid the expense and time of going to trial. If you can’t resolve your dispute voluntarily, then trial is the only option.
Prepare for your negotiations. You should prepare extensively for negotiation. Proper preparation requires that you understand what you want and why you want it. You also need to think about how the other side will approach negotiations. Consider your best alternative to negotiation. You need to know your best alternative so that you can plan how aggressive to be in negotiations. For example, you might have a strong case for breach of contract. If you do, then your next best alternative could be to go to trial. In this situation, you might be hard-nosed in negotiations. The minimum you will accept. This is called your “walkaway” point. It is your baseline for negotiations. The more attractive your best alternative is, then the higher your “walkaway” point will be. If the other party can’t meet your baseline, then you walk away from negotiations. The other side’s motivation. You should also try to step in the other side’s shoes. Try to think about what their best alternative is, as well as their bottom line. For example, if the broadcaster has other content providers it can broadcast, then it might be aggressive in negotiations.
Negotiate effectively. You probably will meet to negotiate at a lawyer’s office. Your attorney can take the lead on negotiations, but you should always be prepared to offer your input. As the client, you must agree to any settlement. Try to remain calm and objective. Also show that you are really listening to what the other side says. Negotiations will be effective only if the other side thinks you are negotiating in good faith. Try not to settle too quickly. The other side approaches negotiations with the expectation of negotiating. If you settle too quickly, you might anger the other side.
Mediate the dispute instead. If you don’t have a lawyer, then you might want to mediate the dispute. Mediation is a form of “assisted negotiation.” You and the other party meet with a third person, the mediator. The mediator is neutral. He or she is not a judge. Instead, the mediator listens to the dispute and tries to nudge each side to come to an agreement. Mediators are experienced at getting people to listen to each other and to work to find common ground. You will have to pay for a mediator (usually $200-800 an hour). However, mediation is often less expensive than a trial. You can contact your local courthouse and see if they run a mediation program. Alternately, you could contact your local or state bar association and see if they can give you a referral to a mediator.
Draft a settlement agreement if you reach a resolution. Your lawyers can draft the settlement agreement. If you participated in mediation, then the mediator can help you. A settlement agreement is a binding contract. The settlement agreement can lay out new contract terms for both parties to follow. In other words, it is a chance to amend your contract. If you both agree to terminate the contract, then you would each sign a “mutual rescission agreement,” which ends the contract. You also should sign a “waiver and release.” With this waiver, you agree not to sue each other in the future based on your contract dispute.
Go to trial, if necessary. Not every dispute can be resolved with negotiation or mediation. Instead, you might have to go to trial. After sending your termination letter, the other party might sue you. You will then have to defend yourself in court in a breach of contract case. You should have a lawyer represent you if a lot of money is at stake. Trials can be very complicated, and you probably cannot learn the law and rules of evidence on your own. Accordingly, you should hire a lawyer if you are sued. For more information about a breach of contract trial, see Defend Yourself in a Breach of Contract Lawsuit.
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