Contracts are basically an agreement between two parties in written form. A basic contract is a document that legally binds two or more parties together in order to reach a goal. This means that there will be consequences that would follow if at least one of the parties involved will not abide by the terms and conditions set in the contract. In some cases, however, one party might want to terminate or opt to not renew the contract either for a simple or complicated reason. One good way of doing so is by coming up with a professional and well-written contract termination letter to formally end the agreement.
Thinking about writing a termination letter to end a contract may seem like a complicated matter. We will not promise that it will be easy but we will do our best to give you some of the basic information and guidelines about contract termination letter. Aside from the basics of contract termination letter, we also have some sample contract termination letters that will give you a good overview of how these letters look like. These sample letters will also serve as a good reference once you start writing your very own contract termination letter.
Are you ready to formally end your contract and to find out more? You should definitely scroll down and keep reading this article.
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What Is Termination of Contract?
Terminating a contract is to basically end a contract agreement between two parties before duties and responsibilities have been duly performed by any of the parties. Termination can also be natural such as when the contract has expired. Contract termination basically relieves the parties from the stated duties and responsibilities that the parties have.
Contract termination letter can also be caused by breach of the terms and conditions stated in the contract. Due to breach, the party affected can sue for any damage and be compensated for the damages that was caused by it.
What Is a Contract Termination Letter?
A contract termination letter, based on the name of this letter type, is a letter that is written with the purpose of terminating or breaking a contract that is deemed to be a legally binding document. This can be used for whatever type of contract that you might be involved in such as a rental contract, a business contract, or a standard employment contract. When one of the parties involved would like to end their involvement in a contract, it is best to have it in writing for documentation purposes whether only one of the parties agree or a mutual decision has been made. In order to come up with a good contract termination letter, one must know the legalities that are involved in the contract that he/she is bound with.
If business contracts are still ongoing, termination should be done in a correct manner in order to avoid any disputes and to ensure that you are not breaching the contract. Whether contracts involve goods and/or services, it is of high importance that proper notification about terminating the relationship or the business arrangement. The contract termination letter will be the one that will serve as the notification of the decision.
Contract termination letters are quite short and are straight to the point. One page for this type of letter will be enough. The basic reason/s for ending the involvement with the contract should be reflected in the letter and why leaving the contract will be beneficial for the parties involved.
Contract termination letters are formal letters in nature. With that being said, it means that these letters should be written properly and carefully. This means following the correct format for formal letters such as starting with the date and including the names of the people involved. Salutations should also need to be formal as you do not want to be too friendly for this type of letter even if you are friends with the other party.
Quick Overview of Contract Termination Letters
You always want to make sure that you follow the correct procedure when it comes to bringing a contract to an end and coming up with a contract termination letter is one of the best ways to properly end a contract. This will formally notify the other party about your plans, plus coming up with this letter will help to make sure that you will not incur any unnecessary damages and to ensure that nothing will be taken against you for ending the legally binding relationship. This letter will typically have a notice and a period of time before the sample notice becomes effective.
You can make use of a contract termination letter if you
- want to give proper notice regarding wanting to bring a contract to an end whether or not you have a reason,
- want to end your contract immediately due to a default regarding the performance of the contract template, or
- want to give notice about an existing problem or issue to the other party and come up with a resolution before the contract termination becomes effective.
A contract termination letter will usually cover the following:
- The type of notice template that was used.
- The amount of time left before it will take effect.
- The amount of leeway allowed in order to come up with a resolution for an existing issue, if applicable.
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Why Write a Contract Termination Letter?
Contracts are meant to protect the parties that are involved. However, there are instances where one of the parties might not want to be involved with the contract anymore but, more often than not, contracts will ask parties leaving to pay for a fee for wanting to leave the contract. However, there can be a couple of issues that come with contracts as well. You may also see sample contract agreement letters.
One of these issues can be loopholes. Loopholes allow one party to get out of the contract without so much as paying for any damages. But regardless of the reason why one party might have for leaving a contract, it would always be a good decision to do it properly. You always want to make sure that you have done everything correctly to ensure that you are not breaking any of the terms and conditions stated in the contract or doing more damage. You may also see formal letters.
Coming up with a formal letter to end a contract and handing it to the other party or parties involved helps to ensure that you are terminating the contract in a manner that is properly documented. Your termination letter will serve as valuable proof that you followed the correct protocol and that you have given the correct amount of notice, plus this also helps to avoid any potential issues that may arise due to improper contract termination. These letters are also needed if you want to give a couple of remedies for contract breaches or you want to end it due to the severity of the breach.
Aside from effectively ending a contract, the termination letter will also give the other party notice of any problem and be able to remedy the issue before the termination date comes around. For example, in a workplace environment, it can be used as a means to give an employee warning notice if they are not performing well. They will have a chance to do better and redeem their performance and avoid getting terminated from their jobs.
You can find more information about employment termination by reading up on Employment Termination Letters.
Common Reasons Why Contracts End
There are a wide variety of reasons why some people opt to terminate the contract that they are currently involved with. But what are the most common reasons for ending or terminating a simple contract? Some reasons may include the following:
- There is a deadline for the contract and it will naturally end once the contract deadline arrives.
- For manufacturing businesses, they may have found a new buyer for their commodities or services and they would need to end the contract template. This also applies for purchasers who have found a new supplier for goods.
- One party is not satisfied with the performance of the other party or they find that the other party is not doing the responsibilities assigned to him/her.
- There has been fraud, mistakes, and misunderstandings.
- A breach has been committed to one or a couple of the terms and conditions written in the contract.
You can find out more about breach of contract if you read up on What Is Breach of Contract in Business Lawsuits?
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Is There a Need to Give Notice?
The notice that you will need to give will all depend on the terms and conditions that are stipulated in the contract. If you find that there are no direct statements regarding giving notice periods, always assume that it is implied that you give one anyway. But what is considered to be a reasonable amount of notice? Check out the list of factors below:
- The formality of the relationship that you have with the other party.
- The duration of the relationship that you have with the other party.
- The number of benefits that you are getting from the other party.
- The intentions and commitments that you have made all throughout the duration of the contract.
You have to take note, however, that a contract can get terminated without any notice if there has been breach. You may also see sample notice letters.
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The Basics of Writing a Contract Termination Letter
Now that you know a couple of basics about contract termination letter, it’s now time to start coming up with your own contract termination letter. You need not come up with a very long letter. A brief, simple, and straight to the point letter will suffice. So how to write termination notice? We are here to give you a couple of basic tips on how you can do so.
1. Review the Contract
Make sure that you go through the terms and conditions of your contract carefully. If you feel like you are having a hard time comprehending some of the stipulations in the contract, you might want to ask for help from an attorney. Make sure that you take note of the directions for canceling the contract. You should also take note of who your recipient will be as you want to make sure that your letter is received by the right person.
2. Formatting Your Contract Termination Letter
If you have a personal stationary with your official letterhead attached, you can make use of this. However, if you do not have a personal stationary, you can definitely make your letter in the text editor application that you have on your computer. Do not forget to make use of formal or appropriate-looking font style and keep the font size between 10-point to 12-point. Make sure that your contact information is reflected in your termination letter.
3. Address the Letter Properly
Make sure that you direct your letter to the correct recipient. In your salutation, include a formal salutation, which can be the title of the person you are addressing it to (Mr., Ms., Atty., Dr., etc.). You may also see proper letter formats.
4. Succinct Statement of Purpose
Make sure that you start your letter in a succinct and straightforward manner. You can start with the following statement:
- I am writing to give you notice about my desire to terminate the contract that we are currently bound to be effective on [PROPOSED DATE].
You want to make sure that you do not forget to include any terms that will help to make your letter a whole lot more specific with regard to terminating the contract. You may include a specific statement such as the following:
- “As you may know and as stated in our contract, I am required to provide at least 30 days as notice before the termination will be considered final or effective. This is the reason why I am writing this letter as it is intended for that very purpose.”
6. Be Open for Communication
You want to make sure that you are open to communicating with the other party should they have any questions regarding the termination of the contract. Even if you have already supplied your contact details on your letterhead, make sure that you still include it in the last paragraph of your letter along with the best times and best days for you to be contacted. You may also see sample introduction letters.
7. Say Thanks and Close Properly
Do not forget to tell the recipient that you are thankful that he/she has read your letter. Make sure that you also state that you would like to receive a prompt reply regarding this matter. Make sure that you also end your letter with the formal sign off greeting “Sincerely.” Provide about four lines of white space for your signature and do not forget to also type your full name after the four lines. Affix your full signature above your typed name and make sure you have a backup copy of this letter on your computer or online drive. You may also see sample contract termination agreements.
8. Review the Letter
Do not forget proofread and edit your letter. Make sure that you correct the misspellings and grammatical errors as soon as you can. You can also ask someone else to review it for you.
9. Send Your Letter
Make sure that you send your letter via certified mail to ensure that you have a receipt that you have sent the letter in case the other party claims that he/she has not received the letter. You may also see mail letter format samples.
10. Check the Status of the Request
You can check on the status of your request every now and then as some companies tend to be a bit relaxed regarding expediting requests. If you are persistent, your request is highly likely to get expedited.
Dealing with Contract Breach
Breach is basically the act of breaking or failing to follow terms and conditions that have been set in a contract. Breach when it comes to contract agreements is not really uncommon. A lot of times, contracts get terminated due to breach.
How will you know if you encountered breach? How do you deal with the breach? We have everything that you need to know about dealing with contract breach below. Make sure you keep on reading to find out how.
1. Did the Other Party Commit Breach?
Before concluding that the other party did commit a breach, you want to make sure that what has been committed is indeed actually a breach. To identify if what has been committed is considered to be a breach, you need to ask these questions:
- Did the other party fail to perform duties and responsibilities that have been assigned to him/her?
- Did the other party fail to abide by the terms and conditions?
If your answer is yes to any of the two, then there has been a contract breach.
2. Ask for Damage Compensation
If you are the one affected by the breach, you can ask the other party to compensate you for the damages that he/she has caused you due to the breach. You may also see breach of employment contract samples.
If you are the one who caused the breach, you can mitigate or alleviate the amount of compensation for the damages that you would need to pay. Ask your lawyer for advice regarding this.
3. Performance Refusal
If you are going to refuse to perform the duties and responsibilities assigned to you, you are the one who is committing the breach. If you want to continue with the refusal of performance, consult with your lawyer for advice regarding how you can mitigate damages or how you can properly terminate the contract letter format with minimal damage compensation to pay.
4. Filing a Lawsuit
You can always opt to file a lawsuit for any damages that the breaching party is liable to pay. If you need advice regarding how you can do so, do not hesitate to hire a lawyer to help you out.
So there you have it! Now you have everything that you need to know about contract termination letter plus a couple of tips that you can follow should you experience a breach of contract.
Looking for information about other termination letters? Do not forget to check out Printable Termination Letter Samples and Templates.
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