There are many ways parties try to get out of contracts. Most of those are a breach of the contract. Here’s an example of a question I have gotten from a tenant to a lease.
I have a 5 year contract (actually a lease) with 4 years to go, but the building owner just told me I have to vacate the space in 4 months because he wants to combine it with adjacent space for a bigger tenant. What recourse do I have?
While this is highly unusual in the case of a lease for commercial space, this kind of notice of termination is not at all unusual for many contracts.
Step 1: Read the Contract
First read the section on termination in your lease in case he covered himself in the lease for just such and occurrence and you didn’t see it when you signed it.
Step 2: Give Notice, Ask for Assurance
If the lease does not grant him power to terminate like this, he is telling you ahead of time that he intends to breach the lease. That is called anticipatory repudiation. You should ask for assurance that he will comply with the lease terms and remind him of the damages he would have to pay you in case he does breach the lease (see below). If he does not revoke his intention to breach the lease then you might be able to leave before the 4 months is up and stop paying rent at the time you leave.
Step 3: Sue for Damages Under Breach of Contract
If he goes ahead with his plan to remove you, he’ll be in breach at the point in 4 months when he forces you to leave. Whether you leave before he removes you or you wait the full four months, you could sue him for the difference in rent if your new space costs more than your current space. You might also be entitled to consequential damages such as the costs you incur to get new space similar to the one you now lease, and losses you incur because your business is interrupted.
A contract is “private law.” The parties are supposed to abide by that law. But sometimes a party finds it more convenient to breach the contract so he can put his resources to a better use. That promotes efficiency in the marketplace. That’s the case for the landlord in the above scenario. But if you are on the receiving end of such a breach of contract, it’s not necessarily efficient for you! So don’t get mad, get even. Know your rights when it comes to the contacts you sign, and be willing to enforce them.
Argent Place Law, PLLC provides legal business counsel to entrepreneurial companies in matters of business, corporate and contract law, intellectual property law, and succession planning, including estate planning with wills and trusts for its CEO clients. Argent Place Law For The Life Of Your Business.