Help, I’m Stuck in a Contract and I Can’t Get Out!
Many prospective clients call us wondering if they can break a contract. Some of these clients claim simply that they didn’t know what they were signing. Others know what they signed, but circumstances have changed and they feel they need to get out of the contract. Because contract law is very much decided on a case-by-case basis, it is a good idea to have an attorney review any contract before you sign it – or try to break it. This blog post does not constitute legal advice, but it will attempt to give an overview of some of the reasons a person can or cannot break a contract in North Carolina.
“I didn’t know what I was signing!”
We have had some clients call us and state that they accidentally signed an agreement, or didn’t understand what they were signing. That is not a defense in North Carolina and it will not get a person out of a contract. Davis v. Davis, 256 N.C. 468, 471–72, 124 S.E.2d 130, 133 (1962) explains this very well:
The law imposes on everyone a duty to act with reasonable prudence for his own safety. So one who contracts with another cannot ignore the contract merely because he becomes dissatisfied upon learning of the obligation assumed when, without excuse, he made no effort to ascertain the terms of the contract at the time he executed it. One who signs a written contract without reading it, when he can do so understandingly, is bound thereby unless the failure to read is justified by some special circumstance.
In layman’s terms, that means that by signing a contract, you are also saying that you have read the contract and agreed to its terms.
What about intent?
A person’s intentions may be different than what is formalized in a written contract. For instance, you may decide to rent an apartment, and come to a verbal agreement with the landlord that they will make certain repairs beforehand. Or, maybe you decide to buy a home, and you sign a contract with a real estate agent to help you, but you don’t realize that it’s an exclusive contract with that real estate agent. In these circumstances, if you realize the repairs are not being done or you decide you want to switch real estate agents, you may begin to feel that the contract is unfair – it doesn’t reflect the terms you actually wanted in writing. Your intent was different than what you signed up for.
The problem is, at that point, it’s usually too late to do anything about it. The parties’ intentions are important in contract formation – but the intentions are determined by the writing, not by what the parties say or do before or signing the contract. “It is a well-established rule that the intent of a party is to be ascertained by the words he chooses. All of the words used are presumed to have a meaning selected for the purpose of displaying the user’s intent.” Franklin v. Faulkner, 248 N.C. 656, 659, 104 S.E.2d 841, 843 (1958).
Even though this may seem unfair in certain situations, it makes sense. If we didn’t have laws like this, anyone at any time could say “this contract isn’t what I agreed to, I want out of it!” and contracts wouldn’t be worth more than the paper they’re written on.
What about a mistake?
Sometimes, mistakes come into play. A person may mistakenly sign a contract that they believe will last for six months – but the contract actually states in writing that it lasts for one year. Mistakes often fall into the above category. As long as people have the opportunity to review a contract before they sign it, they are responsible for anything in that contract. But, in the case of a mutual mistake, a contract can be changed.
For example, in the case of MacKay v. McIntosh, 270 N.C. 69, 153 S.E.2d 800, a buyer and a seller of some property both believed that the property was commercially zoned. After signing the contract for the sale of the property, the parties learned that it was not, in fact, commercial zoned after all. Because both parties had been mistaken, and because the zoning of the property was an important part of the agreement, the court ruled that the contract could be rescinded.
Fraud, duress, and capacity
There are a few other things that can make a contract void.
Let’s say in the above example that the seller did know that the property was not commercially zoned, but they lied and told the buyer that it was when the buyer asked. Maybe they even presented a false document to the buyer with fake zoning lines on it. In this case, even though the mistake was only on the part of the buyer and the seller knew what was really going on, the buyer would be able to get out of the contract because of the fraud of the seller. Fraud is an intentional misrepresentation of material fact that deceives and harms the party being deceived. Fraud is an extremely serious crime, and if you feel you have been a victim of fraud in your contract, please give us or another lawyer a call and keep close track of all of your evidence of the fraud.
Let’s say that a couple are getting divorced. One of the spouses draws up a document describing how the property will be distributed – and then holds a gun to the other spouse’s head and makes them sign it. This document would actually be invalid because separation agreements must be notarized in North Carolina, and unless you have a criminal notary, they’re probably not going to notarize this document! But, aside from that, the contract would be void because it was signed under duress – the bargaining positions were far from fair. The gun is an extreme example. Some contracts can be made void if the parties simply had uneven bargaining power – for instance, a wealthy, powerful, older man divorcing a young, inexperienced, poor, and uneducated spouse.
People who are mentally disabled, under the influence of drugs or alcohol, or elderly can lack capacity to sign a contract. For instance, you would not want someone suffering from dementia to sign a contract giving away the house and business to one child and cutting everyone else out of the will – especially if that one child was the one asking the parent to sign.
Conclusion: think before you sign!
Any important contract you sign – whether for a house, an apartment, a car, or a job – is something you should take seriously. Read it carefully and consider asking a lawyer to do the same – you never know what nasty provisions they might catch in the fine print. Contracts are almost always negotiable, and it is much easier to change one before you sign it than after.
If you have signed a contract that you now do not agree with, consider whether you signed it under fraud, duress, or while lacking capacity. Or, maybe there was a mutual mistake in the contract or something else that could make it iffy (for instance, vague language about certain provisions, or a lack of notarization where one is required by law). If you are in a situation like that, please consider giving us a call at (704) 559-9745 for advice uniquely tailored to your situation.