When an individual or an organization enters into an agreement with another entity and decides not to renew the contract on its termination date for whatever reason, the best way to this is through a contract termination letter. Use this type of communication to provide written notice to an organization or a person of the termination between the two parties.
Contract Termination Letters
How do you write a letter to terminate a contract?
The reason for the desire to terminate the contract could vary and such reason should be appropriately mentioned in the contract termination letter. This helps avoid the automatic renewal of the contract that has governed the business relationship, which by the agreement will end at the date when the contract expires.
But you may also send a contract cancellation letter depending on your own needs. Here are some important pointers to consider when writing a notice of termination of contract:
- Review the facts
There are some things you need to do before writing a cancel contract letter. First, you need to review the facts and the records of the company and the employee, and how this relationship affects both. There are state laws when it comes to termination issues that could probably get you in trouble. Go through the interactions between you and the employee you plan to terminate and from there, make a fair and wise decision.
- Focus on diplomacy
Termination shouldn’t just end abruptly. As much as possible, try to maintain professional relationships with the terminated company or employee. When writing end of contract letters, make certain that you provide the correct details so that in case of a lawsuit, you always know the facts.
- Organize and outline the letter
A formal contract cancellation letter should have three essential elements – your initial announcement of the termination, the next steps, and additional resources. Provide an explanation for each of these elements concisely and clearly so that you always know what to do when termination day comes. Review and edit your draft then remove or add sections as needed.
- Main points
The first paragraph of your letter should already state the main message that you want to convey. Clearly provide the reasons for your decision why you want to end the contract with the employee or company. You can use phrases that describe the urgency of the situation and don’t forget to mention the termination date.
- Enumerate the next steps
This section resolves any open-ended problems and what the recipient must do next. Be both clear and concise in this section. To make sure that you won’t make any intrusions to the rights of the other party, you need to involve your legal counsel to avoid facing a lawsuit.
- Provide resources
The recipient of the notice of termination of contract may have questions that need to have immediate answers before the other party leaves. Make sure to provide them with contact details of a contact person who can answer their questions. You can then end your letter with a short but respectful closing.
Contract Cancellation Letters
How do I terminate an independent contractor contract?
Independent contractors often end up working for big businesses. In the case where the independent contractor’s services are no longer required or if their performance has become unsatisfactory, you have to end the relationship.
Most agreements with independent contractors have built-in termination provisions that would describe the conditions wherein you can terminate the contract. You should strictly follow termination provisions in such an agreement to avoid lawsuits due to breach of contract.
In the absence of a written agreement where there are no specific oral provisions related to the termination of the oral agreement, it’s recommended that the parties should simply discuss the situation and decide the best way to terminate the relationship.
Notice Of Termination Of Contract
Ways of terminating a contract
There are several reasons why you might want to write a contract termination letter. For instance, you can terminate the contract if specific conditions have changed since the creation of the contract or a contract can also get voided if it wasn’t legal, to begin with.
Cancel Contract Letters
But always make sure that when you decide to send a contract cancellation letter, it results in the least amount of damages for you. Here are the ways to terminate a contract either with or without a notice of termination of contract:
Terminating a contract legally
- Check for a termination clause
A termination clause is generally found in many kinds of automatically renewing and long-term contracts. These provide you with the necessary steps to take if you decide to terminate a contract.
- If possible, argue the contract
There are instances where you can’t perform your contract obligations because of some impossibility. As such, you have the legal right to terminate the contract. However, this may not apply if you caused the circumstances of your own failure to perform. It must be either the fault of another person or as a result of a hurricane, earthquake, and other acts of nature.
- Claim a frustration of purpose
This happens when the reason for entering a contract is longer applicable. For a contract based on frustration of purpose to get terminated, all of the parties involved should know the contract’s purpose.
- Establish a failure of condition
If one of the signing parties fails to perform his end of the agreement, this may allow the other party to terminate the contract.
- Negotiate the termination
If you decide to get out of the contract, notify the other party involved. Try negotiating your way out of the agreement. If both parties involved can have a mutual agreement, then you can terminate the contract at any time.
- Claim breach of contract
If one of the parties unknowingly fails to adhere to the terms of the contract, then the other party may terminate their end of the agreement. The former or the party who breached the contract, in this case, has no right to complain when the contract gets terminated and neither will they have a say on whether or not the other party can terminate the contract.
Rescinding or Voiding a Contract
- Rescind the contract
A rescinded contract places the signatories involved in the contract back to how they were before they signed the document. A full cancellation of the agreement is possible under certain circumstances. For this, you can review the cancellation clause in the contract if it has one.
- Identify the status of fraud violation
Every state has a Status of Frauds that determines that certain kinds of contracts must appear in writing for them to be legally enforceable. Since the contracts must appear in writing to become legally enforceable, you could terminate a verbal agreement for any reason.
- Deal with an issue of no cancellation
If the contract you signed doesn’t have this clause, you need to check your state’s statutes to verify if you are still within the cancellation period. There are some states and federal laws where certain contracts can get canceled within a certain period of time.
- Negotiate the cancellation
When you entered into a contract that has no rescinding clause and thus, cannot get canceled by federal or state law, you can try to negotiate with the other party a cancellation of the contract. If you can come to a mutual agreement, you and the other party can cancel the contract anytime.
- Claim Constructive Fraud
You can void a contract due to fraud. This can happen when one of the parties involved in the contract unintentionally makes false claims about something that the other party depends on. Because of this, the other person got injured.
- Claim Actual Fraud
Also, referred to as “fraudulent misrepresentation,” this can happen when one party intentionally lies about something relevant to a part of the contract. If the other party believes this and gets injured in the process, then it’s considered Actual Fraud. This has to be something concrete that the other party cannot prove false.
- Prove a lack of capacity
This involves certain kinds of people who don’t have or just lack the ability or the capacity to make important decisions for themselves. They are not allowed to enter into legally binding contracts. Some factors which can hinder an individual’s capacity to sign agreements are intoxication, mental incapacity, age, and more.
- Claim that you entered into the contract under duress
If you were either pressured, blackmailed or forced to sign the contract, such contract becomes void. Anyone who signed a contract should do so freely, knowingly, and at their own will for the contract to become fully enforceable.
- Show some form of illegality
Any agreement created for something illegal is immediately deemed unenforceable and void. This means that either party can terminate the contract at any time.
- Decide that the contract was a mutual mistake
Mutual mistakes can happen when the parties involved in the agreement had miscommunications and really never agreed on the terms because they didn’t understand what they agreed upon. If the parties genuinely made mistakes in the details of the contract, then the contract can get voided if the other person hasn’t fulfilled his part of the agreement yet.