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The One Contract Trick Everyone Should Know About

...especially when you want to terminate a contract early

· Contract Management,Purchase Experience,Veeto Tips,Contract Termination,Case Study

A first-principles approach...

The only reason I call this a "trick" is because it's stupidly simple, incredibly effective, and yet so little-known. As a result, people who know about the "trick" might seem like geniuses to those who don't about it. But it's really just a first-principles approach to one of the most common features of commercial life today: the contract.

Most purchases are technically contracts.

You want something; someone has that something; and you have something to offer in exchange. The contract just says who gets what, how, and when. Most purchases you make are technically contracts, insofar as it is possible for either you or the seller to either hold up your end of the bargain or not.

Example: you buy a gallon of milk at the grocery store with an expiration date 2 weeks from now; you get home and pour yourself a glass of milk; you take a sip and discover that the milk has already spoiled; in this case, the grocery store arguably breached the "contract" by giving you something different than advertised.

But this trick applies mostly to the kinds of contracts people want to get out of, sometimes by terminating the contract early.

I mention the above example just to acknowledge right upfront the wide range of purchases that might technically entail a contract. But I do this so that, for the purpose of this article, I can then say that this "trick" is only useful for long-term or recurring contracts, agreements that obligate you to keep paying for something whether you continue to want that thing or not.

copy of contract request

It's really not something that requires genius. You just have to know where to look, and just like a magician's magic trick, the key is to look where no one else is looking.

How do you know you're in a contract--really?

Serious question--and there are two possible ways to answer it. You could recount for me all of the past events that might tell the story of you having entered into a contract:

  • you talked to the salesperson;
  • you perused your product/service options;
  • you considered the price;
  • you glanced at the terms of the contract;
  • and then you executed it.
  • since then, you've been paying the monthly contract fee, and you've been getting (some or all of) the product/service in return.

That's how most people would answer the question--by stating what seems obvious, usually based on history, precedent, and memory. But that's not the first-principles approach.

From Aristotle to Elon Musk, a first-principles thinker would start in the present to answer the question, probably by looking first at the evidence itself: the executed contract. Sometimes you have your own copy of the executed contract, but it is surprisingly common, actually, for the buyer to have never received a copy of the executed contract. Instead, therefore, what you may have is actually just a shell of the contract you think you executed. To a first-principles thinker, this would not be strong evidence.

The strongest evidence would be to start with what the seller--the other party to the supposed contract--believes, and can prove. This is the trick: ask the seller to send you a copy of your executed contract.

There might not actually be an executed contract.

It's like a fundamental bias. Oftentimes, when you think you're in a contract, you stop there, and don't bother verifying that assumption with evidence.

“People who write a lot, also listen a lot. They also change their mind a lot. Not necessarily with new data, but sometimes re-analyzing the same data. They also work hard to disconfirm fundamental biases.”


Jeff Bezos

Having handled thousands of contract dispute cases--usually people who hire Veeto when they want to get out of a contract early--we have internal data that would shock you on this point. It is insane how common it is when we simply ask the seller to produce the executed contract and the seller cannot.

Why does this matter? Because the problem of "I want to get out of this contract early" implies that there is some obstacle preventing you from doing this. Usually the the obstacles are the seller's preference that you stay in the contract (and thus keep paying) and whatever the nasty early termination consequences are that the seller says the contract subjects you to.

So, deconstructing this the way Aristotle might if his toga subscription box contract had outlived its usefulness...

broken image

A first-principles analysis would start by identifying the three most important elements of the problem:

  1. There is a contract I am under.
  2. There is a seller who does not want me to leave that contract early.
  3. There is a consequence if I leave that contract early.

Then, the task is to confirm each of these to be true. How? Obtain evidence.

Since you already know that the big reveal pertains to element 1, I will touch first on elements 2 and 3 so that you have a broader context for understanding this point.

What if the seller was OK with you leaving the contract early?

That would render element 2 untrue, because there be no evidence of its truth. In that case, your desire to leave the contract early would not be a problem at all. Since there would be no seller on the other side of the contract with a wish for you to stay, you would be free to leave.

contract review
get out of contract
early termination fee

(I know--this feels like magic when you first start thinking way, and that's why I figure the word "trick" was fair.)


Another scenario might be that the seller is no longer in business. The seller might have gone bankrupt, for example. In that case, element 2 would similarly be rendered untrue, provide that the seller had not, for example, (what is called) assigned the contract to someone else intent on enforcing it against you.

Now let's look at element 3.

What if there were no early termination fee, or any other kind of penalty, for leaving the contract immediately?

In this case, there may be a contract and a seller who wants you to stay, but there is no meaningful consequence to you leaving early. Here are some possible scenarios to illustrate this point. The contract last for 24 months but says you can cancel anytime without penalty--unusual, I know, but we've seen it. Or maybe, there is an early termination fee, but it is minuscule, say, $10 for a contract in which you've been paying $100/month. Last scenario I'll mention here--perhaps there is a significant early termination fee, which is commonly called "liquidated damages," but, for legal reasons--and let's assume you understand these legal reasons in this scenario--that liquidated damages clause is something that the seller cannot enforce in court (for reasons I won't detail here, but will instead simply say, yes, this happens).

what makes a contract null and void

There is something called an "efficient breach" which I would also lump into this category. It basically means that you unequivocally breach your duties under the contract, but you do so because you know that the outcome--after adding together the cost of leaving your old contract and the benefit you derive post-contract, perhaps greener grass, perhaps a cheaper contract for the same service, etc.--is better for you than staying in the contract.

In any of these scenarios, the problem of wanting to get out of a contract early is defused, because the consequence is not something that deters you.

Finally, let's look at element 1.

To prove that you are under a contract, you need evidence of an executed contract.

Does the seller have that evidence? Again, this is the trick: just ask the seller to send you a copy of your executed contract. If the seller fails to do this--whether you think you were under a contract; whether you were actually in a contract at some point in the past; or whether you've been behaving for many months as if you were in a contract--then the most important evidence for element 1 is missing. And, thus, the first-principle thinker would conclude: no evidence, no contract.

I cannot tell you how many thousands of dollars in legal fees and who knows how many wasted man-hours I have saved people with this one trick.

"Think you're in a contract? Want to get out? Ask the seller to send you a copy of your executed contract."

Here are some of things a seller might send you, or say, when you ask for a copy of your executed contract--none of which are necessarily your executed contract:

  • "Yes, I have an internal memo that says you signed up for X on such and such date. Thus, you're in a contract...because why else would I have this internal memo?"
  • "Oh, well I see that you checked the box on our application to indicate that you had read the terms of service. And by doing this, you executed the contract."
  • "Hmmm, well here is a copy of your contract." But it's actually just an invoice or order form that references some terms and conditions document you never saw.

I should note that there are a number of factors that could be material in determining whether a contract was actually executed or not. So this article is not intended to tease out all of those factors out. Rather, this article is intended to direct your attention where most people aren't looking.

Bottom line: always ask for a copy of the executed contract, because if the seller fails to produce it, you might not be under contract after all.

Does this trick actually work?

Yes. Last month, we helped an insurance broker get out of a $25,000 contract by building his case around this one trick. We asked the seller to produce a copy of the executed contract. The seller offered several responses, and arguments, like the bullet-point examples listed above. But in the end, the seller lost, and we won. Not because we're geniuses, but because...well, this trick.

Do the obvious.

When you want to get out of a contract, don't waste your time and energy on crap that doesn't work. Learn what does :clap:. Attorneys hire Veeto to solve their own legal problems, and within the first 10 minutes, you'll know exactly why.

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