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#Open the contract and click the "Fail" button at the bottom. At this point the contract will be failed. However, the courier package will remain intact.
#Trade the courier package back to your contractor.#Next set up a private item exchange contract with all the items for the value of the collateral of the failed contract. To do this you will have to remove the items from the courier package because the courier package cannot be re-contracted a second time (this is assuming that the courier package has already been re-contracted once from your contractor to your hauler).
#Send an evemail to the customer explaining why you failed the contract and ask them to accept the item exchange contract to return their items for the collateral.