Contract Termination Letter Template

Contract Termination Types

There are two types of contract termination:

1. Termination for Cause. This option, also known as a "termination for default," is available only in response to a material breach committed by the other party. The contract itself may state what qualifies as a material breach or the parties can choose to act under the principles of the contract case law. In most cases, contracts are terminated because of a failure to pay or provide services on time.
2. Termination for Convenience. One or both parties may decide to terminate the agreement without specifying a reason for doing so. When a contract is terminated for this reason, it is not necessarily done as a response to poor performance and not because the other party breached the agreement. However, you can exercise this option only if your original contract provided such an opportunity. Otherwise, quitting a contract single-handedly will be considered a breach of contract on your part.

How to Write a Termination of Contract Letter?

A Contract Termination Letter is a business letter and should be written only on company letterheads. It usually consists of the following sections:

1. The names, mailing addresses, fax numbers, and email addresses of all the parties. It is important to point out the contract number in the reference line.
2. The subject matter of the letter. A Contract Termination Letter must be written under the established terms of termination of the original contract and within the time limits set by the contract.
3. The reasons for termination of a contract should be indicated. These reasons can be various such as fraud, breach of contract, misrepresentation, impossibility to fulfill terms of the contract, etc.
4. The party that initiates the termination of the contract should take notice of all of the important dates, such as the date of the original contract, the dates of delivery, and the dates relating to the termination agreement.
5. Monetary compensation or penalties for early termination of a contract, and also the mode of payment should be indicated in this part.
6. Signatures of the parties.

The best way to end this letter is by indicating that you are willing to do business with the party in the future.

How to Respond to a Termination of Contract?

Once you receive a letter to terminate the contract, consider composing a Termination Acceptance Letter. It is a written response to a Termination Letter that will help you end your contractual relationship in the most professional and dignified manner. It can also be a way for you to convey significant information or business offers.

Here are some tips that will help you respond to a Notice of Termination of Contract:

• Add details that promote your business to secure future business contracts and dealings with the addressee;
• Express disappointment for the termination but also mention your sincere appreciation and gratitude for the business projects you have jointly made and the opportunities you pursued with the addressee. Avoid venting your frustrations by using polite and decent language;
• State your contact information to ensure continued communication;
• If certain issues must be discussed in person, invite the individual to talk and receive closure;
• Thank the person to whom the letter is being addressed, express hope for future cooperation, and sign the document.

Related Forms and Templates:

• Addendum Templates;
• Service Contracts;
• Breach of Contract Notice.