Lawful Ways to Terminate a Flawed Contract

Contract Dispute -- Car Sales

Contract Dispute

The purpose of this essay is to review the field of contract regulations and laws as they relate to the termination of a contract. The matter discussed in this paper has to do with a change in the manufacturing specifics of car models available for purchase. A customer did not want to buy a car with a 5.9 liter V8 engine as he desires to be more conservation with fuel than this model would permit. The customer requests a vehicle with a 3.2 liter engine, and the sales contract is written accordingly. After the fact, both the car dealer and the consumer learn that the car is no longer available with a 3.2 liter engine or a 3.9 liter engine. In fact, all of the engines currently being manufactured for this model of car are 3.5 liter in size. A number of contract termination scenarios that apply to this case are described, several of which show definitive promise for resolving this sales contract problem.

Introduction

In the course of doing business according to terms that are agreed to in a written contract or agreement, circumstances may change that alter the value of the product being purchased, the match between the expectations of the consumer and the purchased product, or that render the contract valueless. Although these circumstances are not especially commonplace, they are sufficiently frequent so as to establish components of contracts and agreements that include termination clauses. Several types of contract termination clauses are discussed in this paper with respect to the discrepancy in engine size of a car that is to be purchased by Josh Hartly through his local car dealer. The matter at hand is that engines in the size specified by Hartly and noted in the contract (3.2 liter V6) are no longer being manufactured, having been replaced by 3.5 liter engines.

Rescinding or Terminating the Contract

In the matter concerning the specific engine size of a vehicle ordered in response to a sales contract, both parties should be able to rescind the contract due to a mutual mistake of fact (Macaulay, 2010). Neither party in this contractual arrangement acted unethically as the fact about the manufacturing status of the preferred and specified engine size was unknown to both parties at the time they entered into the sales contract.

Parties to a contract may use the option to terminate an agreement by mutual consent. Generally, this clause is used when the contract is no longer relevant and one or both parties are no longer abiding by the contract. Situations under which this clause has application include the cessation of business operations or when the terms of the contract can no longer be faithfully performed. This application parallels the current description of the vehicle specifications that are no longer relevant (Macaulay, 2010). That is to say, the car company cannot supply a vehicle that is not manufactured according to the current standards for production. In a situation such as this, when the matter is a good faith transaction and not a deliberate breach of a contract, the parties may simply consult one another and agree in writing to terminate the contract (Macaulay, 2010). This type of contract termination does not trigger any liabilities for breach of contract that could be attributed to the time when the contract was active (Macaulay, 2010). The fact of the matter is that business contracts are not designed to bind the parties to an agreement for an indefinite period of time (Macaulay, 2010). It is customary for contracts to be written with provisions that specify contract end dates. These end dates are intended to bring the parties together to review the terms of the contract for a renewal of the contract, which can and often does involve a change of contract terms. Under other conditions, the contract end dates are intended to actually bring about a termination of the contractual relationship.

The rules governing contract termination are influenced by the circumstances and contexts in which the contracts are developed ("The American Law Institute," 2007). Situations that bring about termination of contracts can be somewhat distant from the context that surrounds the business agreement. External forces can drive an incentive to terminate a contract. This is particularly true when some external situation has made it impossible for one or more of the parties to the contract to fulfill their obligation to the other parties of the contract ("The American Law Institute," 2007). Occasionally, one of the parties to the contract will take action or behave in a manner that signals that they will not meet the terms of the contract -- that, in fact, a breach of the contract is about to occur. When this situation arises, the party that was expecting the contract to be held may instead terminate the contract and file a suit against the other ("The American Law Institute," 2007).

Potentially Applicable Clauses

The law permits contracts to be nullified or terminated if a mistake has taken place. Indeed, the mistake described in the case is quite common -- parties to a contract often mistakenly believe a particular product is available when it is not. When only one of the parties to the contract makes a mistake, this situation is referred to as a unilateral mistake. The burden to rectify the mistake by voiding it and writing a new contract, or simply by rewriting the contract, falls on the party responsible for the unilateral mistake.