Creating a Termination of Contract Notice Template: What You Need to Know

What is a Termination of Contract Notice

Before we delve into the particulars of a notice of termination of contract template, it’s important that we first try to understand what this document is and the purpose that it serves in a contractual agreement.
A notice of termination becomes necessary when one or more of the parties to an agreement feels that the contract between them is being breached in some way. When a party departs from the terms of an agreement and their actions affect the other party in any significant way, they’re in breach of the agreement and this necessitates notification in the form of a notice of termination.
The purpose of a notice of termination is to inform the other party that their agreement has ended . It essentially allows the party who feels that the other has violated the terms of their agreement to absolve their responsibility to deliver on the terms of the contract. This can also create an avenue for garnishing damages, albeit not in all cases.
The importance of a notice of termination is dependent on the specific reason for terminating a contract. When a party feels that the terms of the agreement have been broken, they write up a notice of termination to absolve themselves of the responsibility to fulfill the contract. Additionally, to the extent that the party believes the other party is responsible for damages, the notice becomes evidence in the pursuit of those damages. This goes both ways.

Termination of Contract Notice Items to Include

The key elements of any notice of termination are: the date of notice, identification of the parties to the contract, a cross reference to the contract and an explanation of the reasons for termination. The simplest way to identify the parties to the contract is to repeat the specific order names. If the parties have varying designations it may be best to quote specific words and phrases from the contract to avoid any confusion.
It may not be necessary to spell out the reasons for any proposed termination. In particular, if it is a termination for default it may be sufficient to say that it is a termination for "default" with reference to specific provisions of the contract. But if a party proposes to terminate a contract for any other reason it is a good idea give the other party the courtesy of informing it of the intent. This can free up time after the termination date for any disputes as to the reason for termination. (Such reasons do not prevent the contract from being accepted as a termination for convenience, but should not be referred to in any notice of termination).

Legal Requirements to Keep in Mind When Terminating a Contract

As with any other legal document, there is a number of legal considerations for drafting a Notice of Termination of Contract template. You will first have to check the terms of contract to find the relevant notice provisions. Most contracts will have a provision specifying how either of the parties could end the agreement. The general rule is that you should always terminate a contract in accordance with the procedure set out in the contract itself. If you don’t your termination could be deemed ineffective and you may also expose yourself to a breach of contract claim.
If your contract does not have a specific termination provision, it is likely that the contract may be ended in accordance with the minimum notice periods specified in the applicable legislation. For example, if your contract is based in England and Wales, the common law principles of termination will usually apply. If the contract existed for a period of specified duration, you will need to refer to the common law to ascertain the appropriate notice period. A common misconception is that you can end a contract "on notice"; however, the English judiciary has historically found that even the giving of a reasonable period of notice of termination will not effectively terminate a contract.
In addition to the common law principles of termination, specific types of contract and its termination are governed by legislation. For example, the Unfair Contracts Terms Act 1977 imposes restrictions on the rights of parties to end consumer contracts containing unfair terms. Therefore, it is also important to confirm whether the contract is regulated by any legislation which may restrict or modify the possible grounds for termination. For example, you should check whether your contract qualifies as an employment contract, a consumer contract, a residential property contract, etc.

How to Draft a Clear and Concise Notice of Termination

One important consideration for readers when crafting a clear and concise notice of termination is to ensure that the intent is clear. In some cases, a notice may fall short of terminating the contract, such as when it is uncertain whether or not the notice is effective. In these cases, courts have held that a letter alternatively may be treated as a notice of breach and, in the context of an agreement for the manufacture or sale of goods, a written demand for adequate assurances may be treated as a repudiation of the contract.
With this principle in mind, the best practice for a party planning to send a notice of termination is to make the request as straightforward and unambiguous as possible. A notice should contain factual information showing the nature of the breach and why the requesting party is entitled to terminate the agreement. Further, the notice of termination may not be sufficient if the breach can be cured. The party sending the notice is entitled to demand assurances that the breach will be cured before the notice goes into effect.

Common Errors and How to Prevent Them

One common error that often slips by is the failure to mention the reasons for the contract termination in the notice itself. Although stating the reasons is not always legally necessary, as a best practice it is helpful to include these details. Not only does it help to maintain transparency and trust between the parties, but it will also clarify any questions that may arise later on. Furthermore, if the reason for termination is a breach of contract, the recipient may wish to show through evidence that the issue has been addressed or remedied. Having these details in the notice can be beneficial in the event of any legal actions in the future.
Another consideration is the timing of the notice itself. A delay in sending out the notice can lead to issues down the line. The sender should make sure to send out the notice of termination as soon as they are eligible to do so according to the terms of the contract, so as to avoid confusion or potential claims that a party waiving their right to terminate the contract. Likewise , the parties should agree in advance that they will "stop the clock" on any deadlines that are based on the delivery of the notice of termination in order to avoid misunderstandings.
In addition, the notice of termination should be delivered in the manner specified in the termination provisions of the contract. Common methods include personal delivery, certified mail, sometimes courier services, or even email (if specific requirements are met). In this respect, when drafting the termination provisions of a contract, the parties should ensure to specify the acceptable methods of delivery in a manner that is clear, concise and unambiguous.
The sender should make every effort to get the notice of termination signed and dated by the recipient immediately upon delivery. While it is not always possible, where it is feasible to do so, this helps to establish an official record of the exact date of delivery of the notice of termination.

Termination of Contract Sample Notice Template

Below is a sample termination notice that a contracting party may use. As with any template, you may modify the sample to reflect terms specific to your contract and relationship.
[Date]
[Name of Contracting Party]
[Address of Contracting Party]
[City, State Zip Code of Contracting Party]
Re: [Termination By…] (i.e. Notice of Termination of Contract)
This letter serves as the termination of the contract between [Contracting Party A] and you (hereinafter the "Contractor"), dated [Date of Agreement] (hereinafter the "Termination"). The reason for this Termination is as follows:
Either Party may terminate this Agreement without cause and for any reason upon thirty (30) days prior written notice. Within thirty (30) days of receiving such notice from either Party, the Contractor must pay [Contracting Party A] an amount equal to the sum of all damages caused by the Contractor and/or its agents, servants, and/or employees having caused said damages.
If [Name of Contracting Party] and/or its agents, servants, and/or employees negligently or with reckless disregard for the truth made any representation as to business quality, quality of the goods or services, experience or otherwise, the Contractor shall be entitled to any and all damages to which the law allows.
All legal fees and other costs incurred by [Contracting Party A] in enforcing any provision of this Agreement shall be paid by the Contractor within thirty (30) days of written demand by [Contracting Party A]. This Termination may be executed in counterparts.

Actions to Take Once You Give a Notice of Termination

After serving the termination notice, it’s crucial to document all further communications with the vendor regarding the cause for termination and the steps that have been taken thereafter.
The entity should:
Communicate further with the vendor only to inform the vendor that the contract has been terminated. No additional conversations should take place about the cause for termination and there should not be any negotiations regarding the activation of a cure clause or other efforts to modify the consequences of termination.
Create a written record of all communications with the vendor. If the contract terms dictate that certain steps must be taken to terminate the contract, it is important to have a record of those steps. Additionally, any conversations with other persons or entities involved in the contract should be documented , and the date of termination should be recorded in the entity’s internal records.
Communicate with the other party regarding their rights. Any necessary communication unrelated to the cause for termination should be sent to the other party as required by the contract terms, and within the time period required. In accordance with best practices, if the contract does not contain a method for the other party to dispute issues such as the effectiveness of the termination, this should be included in the notice.
Inform the board and prepare to defend against any claims that the contract termination was invalid. Proper internal reporting will prepare board members in the event a challenge to the termination of the contract is presented in future litigation or arbitration or in the press.