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How to terminate a contract: notice, cause and the letter

Published · Business deals, money and releases

Ending a contract is mostly about following the contract itself. Most business contracts say who may end them, for what reasons, with how much notice and how notice must be given. A termination letter that follows those rules ends the relationship cleanly. One that ignores them can itself be a breach.

Step 1: read the contract

Before writing anything, find these parts of the contract:

  • The termination clause: whether either side may end the contract for convenience, for cause, or both.
  • The notice period, and any cure period for breaches.
  • The notices clause: how notice must be sent, to which address and to whom.
  • Payment on termination: work done to date, early termination fees or a kill fee.
  • Terms that survive, such as confidentiality, payment and limits on liability.
  • The term: if the contract ends on a set date or renews automatically, a notice of non-renewal before the deadline may be all you need.

For convenience or for cause?

For convenience means ending the contract without giving a reason, as the contract allows, usually on notice and with payment for work done. For cause means ending it because the other side breached it. Many contracts require written notice of the breach and a chance to fix it, often 10 to 30 days, before you can terminate for cause.

Terminating for cause without a valid reason, or skipping the cure period, can let the other side claim that you are the one in breach. Where the contract allows it, some businesses terminate for convenience and reserve their rights over the breach instead.

If the contract has no termination clause

Ending a fixed-term contract early with no right to do so is usually a breach, unless the other side has seriously breached it first or both sides agree. A short written agreement to end the contract on agreed terms is often the cleanest route. Contracts with no end date can often be ended on reasonable notice, but the rules vary, so get advice before relying on that.

What the termination letter should say

  1. The parties and the contract: its name, date and any reference number.
  2. That you are terminating it, and the clause you rely on.
  3. For cause: the breach, when you gave notice of it, and that it was not fixed in time.
  4. The effective date, and how it follows from the notice period.
  5. The final invoice or payment, and when it is due.
  6. Return or destruction of materials and confidential information.
  7. The terms that continue after termination.
  8. A reservation of your other rights, and a contact for questions.

Sending it

Send the letter exactly as the notices clause requires: by email, courier or registered post, to the named address and person. Keep proof of when it was sent and received, because the notice period usually runs from then. The free deadline calculator gives the date a 30-day or other notice period ends.

Keep the tone neutral. A termination letter may later be read by a lawyer or a judge, so stick to dates, clauses and facts.

Free template

The free contract termination letter template ends a client, vendor or supplier contract for convenience or for cause, with the clause relied on, the notice period, final payment, return of materials and surviving terms. To change a project instead of ending it, use a change order. Ending employment or a tenancy follows different rules: see the employment termination letter and the notice to vacate.

General information, not legal advice. Contract law differs between countries and states.

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