The ability to bring an end to a commercial relationship is fundamental. If you have entered into an agreement it is most likely that you entered into a written agreement at the start of your relationship which contains a ‘termination clause’. This is a common clause that will set out both when you can terminate the agreement, and the relationship, and how to do so. You should therefore review your agreement to see what it says on termination and follow the steps accordingly.
What if you didn’t prepare a clause for termination?
If you have entered into an agreement that does not contain termination provisions, such as an oral agreement, the right to terminate can be implied. For example, it could be implied that you have a right to terminate on reasonable notice or if the other party breaches the agreement. In such circumstances, what is ‘reasonable’ is subjective and there are many factors that can be taken into account; the formality of the relationship, any restrictions following termination, the length of the relationship of the parties and any dependence of one party on another. If you are relying on the fact that the other party breached the agreement, you should ensure that you have done nothing to imply that you have accepted that breach. For instance accepting payment for goods or continuing with your obligations. If you have done so, you would not be able to use breach as grounds to terminate unless there is something in the contract itself.
You should ensure that you serve proper notice, as failure to do so could result in termination being disputed. This is more likely if you are relying on implied termination, although even with a written contract containing a termination provision the grounds themselves could be disputed. This could result in lengthy and costly litigation proceedings and undermine any benefit that you have derived from the contract so far. This is why it is particularly important to ensure that the parties have a clear agreement at the outset as to how and when a contract can be terminated, as it will reduce the likelihood of proceedings.
If you find yourself with a contract that you want to bring to an end but you are unsure of how to do this, we can review the contract for you and advise you of the steps you need to take. Our litigation team can assist if you have found yourself in an unfortunate situation where termination or any clause of the contract is being disputed.
However, the real moral of this story is that prevention is better than cure and if you find yourself at the start of a new business venture it is definitely best to ensure that you have clear and appropriate provisions in place that address termination. We are more than happy to advise you on these and prepare suitable agreements protecting you and your business.
For more information or advice on ending a contract please feel free to contact me on 01604 828282 or via email
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