The Basics of Release and Cancellation of Contracts in Florida
Florida Contract Law 101
Contract law plays a highly important and essential role in the government and regulation of the State of Florida. It serves as a sole legal authority for enforcement of agreements between individuals. In a sense structured, it provides rules by which all personal undertakings can be governed. The law is intended to protect individuals from undertaking reckless behavior. It ensures protection for citizens through enforcement of all agreements. If individuals are not bound by any requirements to uphold their promises, an environment of irresponsibility would permeate. Contracts promote a system of values. Contractual law permits individuals to act in a free society. The law is imperative to govern society amongst all individuals, as they negotiate various agreements that entail a broad range of expectations for both parties. It essentially allows participants to create their own law with regard to the particular agreement. As long as the text of the agreement is not against the public welfare , morality or public policy, and does not violate any statutory laws, the contract will be enforceable and lawful. The enforceability of the contract is protected by both civil and criminal procedures. Florida adopts the common law of England. It has accepted some codifications which are designed to replace or alter existing law. Both prior judicial decisions and custom helped mold Florida’s law. Florida makes use of precedent as a means of stating its law. A contract is defined within a number of Florida statutes. Such rules and regulations are found in the Florida Statutes, §671.103. The Florida Statutes governing sales and leases are adopted from the Uniform Commercial Code. Each statute may comprise of a number of sections, such as fences. The terminology of a number of sections is designed to encompass a particular subject. Chapter 673 is subject to a number of uniformity provisions. It is to be construed together and harmonized.
What does it mean to contract release?
A key aspect of contract law is the concept of release and the circumstances under which a release may be appropriate. In modern times, a release is not only appropriate when the parties to a disputed obligation have agreed to fully settle their differences with full and final effect, but in some cases, obtaining a future release is a necessity for the selling party prior to sale or transfer of an interest in property, or before an obligation may be properly assigned or delegated to another person.
Florida law provides that "a release is the voluntary relinquishment of a known right." Brown v. Nassau County Road Improvement Dist., 41 So. 2d 309, 310 (Fla. 1949). A release may not be enforced by the Courts if the releasing party lacked the capacity to make the release at the time of the release contract, the release was made under duress, misrepresentation or mistake, or the release serves as an obstacle to an existing duty owed to a third party.
Further, to validly extinguish a contract, terms of a release must seek to extinguish the entire obligation. In other words, a release should recite consideration for all obligations, whether liquidated or unliquidated. If the parties do not intend at any time to continue their obligations in any respect, such intention must be stated explicitly or by implication.
What does it mean to contract cancel?
The concept of contract cancellation is inherently distressing because it often occurs when a contract has gone wrong. In accordance with Florida law, a cancelled contract is a nullity and void from the beginning.
A Florida contract can be cancelled by mutual consent of the parties, by material breach of the contract, by rescission for certain equitable reasons, by abandonment indicating the satisfaction of the contract, by the expiration of the contract term, or by mere lapse of time. E.g., Dutton v. Sabo, 87 So.2d 158, 160 (Fla. 1956)(only a material breach of a written contract will terminate the entire contract). Even a voluntary offer to cancel a contract is effective as a proposal to cancel the contract. E.g., Prosser v. Strawn, 107 So.2d 174, 177 (Fla. 3d DCA 1958)(a voluntary offer to rescind a lease is a valid acceptance of an offer to rescind even though made at the same time).
In Florida, to cancel a contract, the contract must be expressly cancelled by mutual consent of the parties, or a material breach must have occurred (thus allowing termination by the non-breaching party). E.g., Hughes Supply, Inc. v. Force, 563 So.2d 794, 797 (Fla. 5th DCA 1990)Moreover, Florida holds that "the breach must be a so-called material breach" for the aggrieved party to cancel the contract. E.g., Phillips v. Sutherland, 627 So.2d 515, 517 (Fla. 1st DCA 1993)(to be material, "the breach must go to the substance of the agreement between the parties").
In some states, certain conditions must occur before a party can exercise its right to cancel a contract, such as a material breach must occur. Mullen v. The Dickenson State Bank, 194 P.3d 1244, 1247 (Wyo. 2008)(a breach must be material before a substantial failure of performance gives rise to the aggrieved party’s right to cancel). In Florida, a canceled contract in general discharges the remaining duties of both parties to perform under a contract. E.g., Spicer v. Davis, 253 So.2d 486 (Fla. 4th DCA 1971).
How Release and Cancellation proceedings are Legal
In the event a contractor’s license is revoked, suspended, canceled, or otherwise voided, the contractor is required to notify all current customers by certified mail of the revocation or cancellation of the contractor’s license within 14 days. The release must contain specific information, including the name and address of the contractor, the date of the license board’s final action, and the nature of the action taken. However, just because a contractor fails to send this notice does not give the property owner the right to cancel the contract. It merely subjects the contractor to be disciplined by the licensing board for his or her failure to send the notice. This is just one of the many pitfalls that can befall a contractor if the fairweather friend becomes a foe without any warning.
If a property owner and contractor agree to cancel the contract prior to its completion, the property owner may have to sign a document called "Consent to Release." Essentially, this document simply states that the contractor and the property owner mutually agree to a cancellation of the contract. The document is signed by the customer and the contractor and notifies each party that they are relieved from the contract. A Notice of Cancellation is sometimes referred to as a Consent to Release, and vice versa. Either can suffice to evidence an agreed upon cancellation of the contract.
Notwithstanding the above, often times the parties are unable to agree on whether a contract is cancelled by mutual consent. If this occurs, the property owner may be able to assert a right of rescission. Rescission is essentially a suit asking a court to find that the contract never existed at all. This can be difficult to prove unless the parties have specifically agreed to frontloading or changes not included in the contract.
The Florida Building Code states that a contract is only legal if it includes certain disclosures. To this end, the code states as follows: "(a) A legally sufficient notice of estimate of the cost of construction that provides a homeowner with the total price for the completion of the contract in a manner that satisfies the requirements of this section. (b) A properly executed change order which is incorporated in the contract and includes a legally sufficient notice of estimate of the cost of any recommended change in, or additional work to, the project. (c) A properly executed change order to any existing contract that modifies the original legally sufficient notice of estimate of the cost of construction. In such a case, the change order must provide a price for the completion of the original contract that brings the total price for completion of the contract within the requirements of this section."
This code section also contains requirements for deposit payments. Any deposit payment made by a property owner cannot exceed 10 percent of the total contract price, or $1,000, whichever is less. Additionally, the contract must itself provide a list of all deposits the homeowner has already paid.
In the event a property owner believes he or she has a right to recission, the property owner must file a lawsuit against the contractor in order to have a court grant the request.
The unfair and deceptive trade practices act ("FDUTPA") is also available to combat unscrupulous contractors who violate the code. However, filing a claim under these statutes can be complex, and as with any contract dispute, may require the help of an attorney.
Release and Cancellation Clauses
With respect to releases, common clauses and stipulations in Florida contracts include conditions of liability for one party if there is an accompanying breach of contract. For instance, in Hayes v. Metro. Cas. Ins. Co., 727 So. 2d 1047 (Fla. 5th DCA 1999), the contractual value of the release between Hayes and the insurance company was contingent upon Hayes not breaching the contract; if Hayes breached the contract, he was liable for the full amount of the insurance proceeds.
Other examples of common clauses include the following: Similar to release clauses, many Florida contracts also contain clauses which allow for cancellation and certain remedies if the contract is breached. In Ocean Bank v. Quantum Marine Co., 997 So. 2d 1136 (Fla. 3d DCA 2009), the parties entered into a joint development agreement, which allowed for the unilateral cancellation due to a material breach by either party. It also included remedies as part of the cancellation, to include attorneys’ fees, out-of-pocket expenses and mortgage payments; however, it also granted the non-defaulting party the right to seek further relief. In that case, Quantum breached the contract and Ocean sought the additional relief and not only the remedies provided under the agreement.
Effects of Release and Cancellation in the Eyes of the Law
With regard to the release of a contract or the cancellation of a contract, it is important to remember the legal consequences: If a release extinguishes the underlying obligation, a cancellation does not (i.e. cancellation means that the contract is no longer in effect between the parties; as such the obligation created by the contract is failed to be performed *and, as such, there is no breach of the contract).
A cancellation is an avoidance of an agreement and thus has the same legal effect as if never entered into (i.e. the parties have been restored to their relative positions prior to the execution of the contract *whereas a release extinguishes only the obligation created by the contract whilst leaving the contract itself unimpaired, except as to the obligation so excused) .
A cancellation abrogates the contract itself (meaning that the contract must be rescinded ab initio *whereas a release excepts the contract itself and merely excuses the performance of an obligation on one side).
It is always best to consult with legal counsel prior to the release of a contract or the cancelation of a contract as, if an overall amicable resolution cannot be accomplished, it is important to make sure that the method the parties use to extinguish the contract does not "come back to bite" either party.
When You Should Consult With a Lawyer
Understanding Release and Cancellation of Contracts in Florida
Before you go terminating a contract or getting a party to sign off as released, you should make certain that you are not acting in bad faith. Additionally there is several types of mutual rescission and termination agreements. Before you label your agreement incorrectly, you should consult with legal counsel. As this area of law is very nuanced and involves some areas of hidden legal cost, it is advisable to seek help from an attorney when you can no longer avoid the matter.
Examples of Contract Disputes
Florida courts have addressed numerous disputes arising from the release or cancellation of contracts, rendering a substantial body of case law on the topic. Bowden v. McLean, 125 So. 2d 714 (Fla. 1960) – A contract for the release of mortgage lien was void because it was made with an agent lacking the required consent of the principal. Edwards v. First State Bank of Apopka, 141 Fla. 464, 192 So. 370 (1939) – An executory contract is revocable until the execution of a deed based on it. Gordon v. Cleveland, 78 Fla. 843, 83 So. 97 (Fla. 1920) – A property right cannot be acquired through an unenforceable contract, even if other means of obtaining remedy are barred. Piccirillo v. Helfrecht, 77 So. 3d 710 (Fla. 4d DCA 2011) – A mutual mistake occurred because the parties made a contract in which the subject matter was not in a condition required by the contract. Stuart Loan & Finance Co. v. Harrison, 194 So. 22 (Fla. 1940) – A contract for the conveyance of property is voidable after learning that the property is under judicial sale. Baldwin v. Bradfield, 176 So. 2d 440 (Fla. 3d DCA 1965) – A contract is voidable if executed with a third person and the consent of the party that can still appeal the judgment against it. Thomas v. Bank of Miami, 164 So. 2d 477 (Fla. 1964) – The statute of frauds bars a suit for recovery of a rescinded contract until the contract is rescinded by an assignment or set-off.
Commonly Asked Questions
Q: What is the difference between cancellation and release of a contract?
A: Cancellation refers to a unilaterally terminating the contract before the time for performance has expired. To be effective, cancellation must be made before the time for complete performance has expired. A cancellation terminates only the unexecuted portion of the agreed exchange of performances.
Release is a party’s abandonment of its right under an unperformed contract. A release must be supported by consideration. Neither performance nor tender of performance by the party who is to perform is necessary in order to support a release.
Q: How does a contract become subject to cancellation in Florida?
A: A contract becomes subject to cancellation when any of the following occurs:
- (1) The contemplated performance becomes impossible or impracticable.
- (2) One party to the contract, before the time to perform has expired, indicates it is unwilling to effectuate the agreed exchange of performances by its own performance .
- (3) One party to the contract commits a material breach. A material breach is a breach of a significant and essential term of the contract.
Q: What happens to a contract if a party prior to completion of its contemplated performance indicates it will not complete its contemplated performance?
A: When any of the parties to an executory contract repudiates the contract and renounces his/her obligation to render performance, the other party’s duty of performance is discharged and he/she may recover damages for the breach.
Q: What is a material breach of contract in Florida?
A: Generally, a breach of contract is a material breach if it goes to the essence of the contract and defeats the object of the parties in making the contract. A material breach of contract is a breach that is so substantial that it defeats the purpose of the contract.