Business contract termination letter is a notification written by the company that wants to end a contract in which it addresses the other partner company and informs about the termination of the contract. A business contract is a legally binding agreement between two companies that are established for the purpose of the provision of products or services.
In conducting business, a company may have different business contracts with and relies on other companies. For instance, a hotel might have different suppliers for meat, vegetables, spices, etc. For some reason, if the hotel wants to terminate the contract with a vendor, a business contract termination letter is written.
The termination of contract may occur due to many reasons such as:
- Uncontrollable and natural events
- Breach of contract
- Lack of capacity for the fulfillment of the contract
- No purpose left of existing contract
- Illegality involved
- Miscommunicated and misunderstood clauses
The letter is written to settle the termination amicably and minimize the damages that might be caused to the partner from the company ending the contract. Termination of the contract has to be done in a professional and legal way. Sometimes, the clauses regarding termination are mentioned in the contracts to avoid any legal issues. These often include the time period before which the company cannot end the contract or the time that it requires to provide to the other party before termination. In addition, there are some legal requirements regarding termination of the contract as well which must be followed.
Generally, the format of the business contract termination letter includes:
- Date of letter and date of termination
- Details of both parties
- The reason for termination (if the party wants to provide)
- Reference of any termination clause in the contract
- Ask for or offer any remaining payments
- Contact details for questions
It is necessary to write a termination letter as it serves the purpose of notification to the other party. However, if the contract is non-renewable and the period has ended, the termination occurs automatically and there is no need of a letter.
The letter should be precise, professional and clear so that no misinterpretations or misunderstandings arise. A thorough examination of the contract and its termination legally should be considered before taking any action. In addition, the contract should be ended in a friendly way and if possible, attempts should be made so that the other party would have to suffer the least.
Sample Business Contract Termination Letter
Dear Mr. Paul,
I am writing this letter to inform you that ABC corporation no longer requires the services of your company XYZ for the supply of wood. This termination will be in effect from 1st September 2018.
As per the contract clause, we are informing you before a month of termination. However, we are not canceling any orders that have already been placed.
We are closing our business and starting a new one which does not require wood. We will be clearing any due payments in the month of September.
You have always supplied us with quality wood and it was a pleasure working with your company. If you have any questions, feel free to contact at [Contact].