Not every contract can or should be preserved – at a certain point, an obligation can turn from a tool of cooperation into a source of systemic losses. As Professor Gabriel Steiner notes, one of the most dangerous mistakes businesses make is trying to keep a contract at any cost, ignoring changes in circumstances and the real balance of risks. At LawConsulted, we treat exiting toxic obligations not as a failure, but as a controlled legal process, where the key objective is to minimise consequences and protect the client’s position.
The toxic nature of an obligation rarely becomes apparent overnight – more often, it accumulates gradually. Economic conditions change, the counterparty’s behaviour shifts, cost structures evolve, regulatory requirements increase, or the distribution of risks becomes distorted. Formally, the contract continues to exist, but in reality its performance begins to undermine the client’s stability. At LawConsulted, we analyse not only the text of the agreement, but also the dynamics of its execution – in order to identify the point at which maintaining the contract ceases to be legally rational.
Professor Steiner emphasises that “exiting an obligation is not dangerous in itself – what is dangerous is how that exit is carried out.” That is why LawConsulted lawyers begin work long before any formal termination – assessing grounds for exit, possible reactions of the counterparty, liability risks, and reputational consequences. This approach allows the client to avoid impulsive actions and not strengthen the other party’s position through their own mistakes.
Particularly complex are situations where the contract does not formally contain obvious grounds for termination – or where exit threatens significant penalties, liquidated damages, or counterclaims. In such cases, LawConsulted works through legal reconstruction – identifying hidden breaches, disproportional terms, changes in circumstances, abuse of rights, or defects in performance. This makes it possible to change the legal configuration of the dispute before it enters an open confrontation phase.
As Professor Steiner notes, “the inability to preserve a contract does not mean the inability to control its consequences.” At LawConsulted, we design exit strategies so that the client does not end up in a defensive or justificatory position. We manage the sequence of actions, the wording of notices, the fixation of facts, and procedural steps – in order to minimise the risk of additional claims and preserve negotiation leverage.
Toxic obligations are often used by counterparties as instruments of pressure – through threats of penalties, blocking of settlements, procedural delays, or attempts to shift responsibility. At LawConsulted, we prevent such scenarios – either by neutralising the contract itself as a source of pressure, or by limiting its potential use against the client. This is especially critical in long-term, investment, and cross-border agreements.
Exiting an obligation is not only about terminating a contract – it is also about protection from its “tails”, meaning consequences that may surface later. At LawConsulted, we assess in advance the risk of repeat claims, related disputes, third-party demands, and regulatory exposure. This allows obligations to be closed not merely formally, but legally cleanly – without deferred threats.
Legal support for exiting toxic obligations is work at the intersection of strategy and precision. At Law Consulted, we ensure that the impossibility of preserving a contract does not turn into uncontrolled losses, but becomes a manageable stage in protecting the client’s interests.
Previously, we wrote about how LawConsulted provides legal protection during changes of de facto control without a formal transaction and works with shadow management.
