Termination of Contract Template | Free Download

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The termination of contract letter notifies the other party or parties about the end of the previously agreed arrangement. The party issuing a termination letter to another should stick to the termination clauses mentioned in the contract to avoid future disputes. 

A contract is a legal document and is legally binding on all the parties. It makes it obligatory for the party that initiates the contract cancellation process to ensure that all participants are notified about the termination of the agreement. In addition, this written notification allows each party to ensure that the termination process goes according to the terms & clauses mentioned in the contract.

Why should you write a contract termination letter?

The contract termination letter provides evidence that all the parties in the business agreement are informed about the contract cancellation. This way, you can avoid all possibilities of future conflict and accusations between the involved parties. This document also helps refer to crucial pieces of information (mentioned below) that significantly increase mutual trust between the parties. 

• Agreement-specific conditions
• The start date of the contract
• Reasons for contract termination 
• Settlements resulting from contract termination
• Subject to the contract termination notice
• Period for making any corrections 
• Clauses for termination 
• Date for unilateral contract termination

Reasons for contract termination 

The reasons for the termination of a contract depend on several conditions:

• The contract expires after a pre-decided termination date
• Product and service quality aren’t satisfactory.
• A third-party vendor offers favorable terms and conditions.
• One party unilaterally breaches one or more contract terms.
• One or more parties identify other lucrative business opportunities.
• The nature of business changes.

When can you use the contract termination letter?

The contract termination letter provides details on how involved parties can terminate the agreement, if necessary. For example:

• To inform that party/parties is/are ending the contract.
• To notify business challenges and provide enough time to another party for rectifying their mistakes.
• To use this letter as a piece of evidence.
• To share complexities and inconsistencies with every party.

What should be the tone of the contract termination letter?

It is an official document, and hence it’s crucial to maintain a formal, courteous and empathetic tone. You should maintain a polite tone even if the supplier fails to fulfill the terms and conditions mentioned in the contract. Remember to appreciate the other party for the robust and long relationship and how it helped you achieve business goals. At the same time, also inform them that you don’t intend to continue the bond due to unforeseen circumstances, but would like to collaborate on shared business interests.

Maintain the accuracy of information 

Explicitly mention the critical pieces of information, including dates, reasons, conditions, terms, and clauses. Remember that other parties might get confused and take the wrong action if you fail to communicate details succinctly. In the worst-case scenario, a party might exploit a loophole and take undue advantage, causing financial troubles to the contractees. Also, ensure that each party strictly adheres to all the terms and conditions in the contract and nobody destroys its sanctity single-handedly.

Here are a few quick tips to help you draft a contract termination letter

• Refer to the terms of the contract to understand the conditions based on which you can terminate the contract.
• Mention the terms and conditions that aid the termination of the contract.
• Include the obligations that all involved parties must fulfill before terminating the contract, for example, settling payments or ensuring goods and services are delivered as promised.
• Provide contact details of the authorized person who can resolve recipients’ objections.