Contract Termination Letters: Write ‘em Right

What Do You Do If A Supplier Isn’t Working Out So Well?

PurchTips Edition #357 Click here for the printer-friendly version

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Want to know how to terminate a contract? Then, look at the contract itself! Contracts often specify exactly how they can be terminated.

In most cases, you’ll want to terminate a contract using a contract termination letter. Here are some tips for writing contract termination letters:

  • If there is any particular risk associated with terminating the contract, involve your organization’s legal counsel to ensure compliance with all applicable laws. Legal counsel may prefer to draft the contract termination letter.
  • Be sure that you are allowed to terminate the contract for the reason you wish to. Some contracts allow you to terminate a contract for any reason. Others require a failure by the supplier, a notification from you to the supplier that it had failed, and an opportunity for the supplier to correct the failure before you can terminate the contract.
  • Determine termination date that complies with any notice period within the contract. For example, some contracts say “This contract may be terminated by either party for any reason on thirty (30) days notice to the other party.”
  • The message itself doesn’t have to be complicated. The key sentence can simply be: “I am writing to you today to let you know that [your company name] is terminating our services with your company, effective [termination date].”
  • If the contract requires a reason for termination, cite that reason in your contract termination letter.
  • If the supplier has in its possession any materials or other property belonging to your organization, include in your contract termination letter a mention of what you want back, where those things are to be returned, how the supplier is to transport those things to you, and a date by which they should be in your organization’s possession.

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Copyright 2016. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.

By Charles Dominick, SPSM, SPSM2, SPSM3