MAKE YOUR FREE Letter ending a contract

A contract termination letter provides formal notification of the decision of a party to terminate or cancel an agreement. Business contracts which are delivered on an ongoing basis need to be terminated correctly to avoid any disputes. Whether the contract involves regular delivery of goods, the supply of services or another open ended business relationship, it is vital that proper notification is given of a decision to bring the business arrangement to a close. 

Make sure you follow proper procedure when you wish to bring a contract to an end with this contract termination letter. This letter to end a contract is required to notify the other contracting party when you wish to end a contract immediately or by notice. Preparing this letter will help ensure that unnecessary damages won't be brought against you by the other party to the contract. This contract termination letter covers the type of notice used and the period of time before the notice takes effect.

Use this letter ending a contract

• to bring a contract to an end by notice (there need not be a reason)
• to bring a contract to an end immediately because there is a default in performance of the contract
• to give notice of a problem to allow the other party to put it right by a certain time before termination takes effect

This letter ending a contract covers

• the type of notice that is used
• the period of time before the notice takes effect
• the time allowed to remedy the problem (if any)

Preparing a formal letter ending a contract and delivering this to your supplier or purchaser ensures that the process of terminating the contractual business relationship is properly documented. This documentation serves as valuable proof that the correct notice period (if required) was given and helps to avoid any potential disagreements. It can also be used if a contract needs to be brought to an end immediately (eg. due to a serious breach of contract).

Aside from definitively ending a contract, a letter ending a contract can be used to provide notice if there is a problem (eg. poor performance if services are being supplied under the contract); it gives the other business an opportunity to put things right by a certain date if they wish to avoid termination of the contract.

There are a variety of possible reasons that a contract between two businesses might come to an end, including:

• The contract is for a fixed term or project and naturally comes to an end;
• The buyer (or seller) has found a new supplier (or purchaser) and needs to end the existing contract;
• One party is unsatisfied with the performance of the whole or part of the contract by the other party; or
• There has been a breach of one or more terms of the contract.

The amount of notice which needs to be given will generally depend on the terms contained in any written contract. If there are no express terms regarding notice periods, or in the absence of a formal agreement, it is implied that 'reasonable notice' should be given. The meaning of what constitutes 'reasonable notice' will depend on factors such as:

• The degree of formality of the commercial relationship (eg. was there a contract in place);
• The length of the business relationship;
• Any dependence on revenue or supply; and
• Any common intentions, or commitments made, at the outset of the contract.

Certain material breaches of the contract (eg. complete failure to deliver goods or services, or to pay an invoice within a reasonable amount of time) may give rise to the termination of the contract without notice.

Some contracts provide that, where there has been a minor breach, the offending party is given a chance to rectify the problem. In this case, a letter ending a contract can allow for the termination to be cancelled if the issue in question is satisfactorily addressed by a certain date.

Ask a lawyer for specific scenarios where:

• there is no contract in place
• you are not sure whether the other party is in the wrong
• you want to make changes to the contract
• you are in the wrong