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Terminating a commercial contract

During the lifetime of any business, it is likely that at some point a commercial contract will need to be terminated. This may be as a result of a change in business practice, unsatisfactory performance or the service simply no longer being required.

Our commercial dispute lawyer has many years’ experience and can provide free legal advice to businesses on how and when commercial contracts can be terminated. Becky also has a broad experience of dispute resolution.

Commercial contract

A commercial contract is a legally binding agreement between two or more parties on a commercial issue.

It is advisable to have a written contract, so all parties are clear on their rights and responsibilities.

Termination of a commercial contract

A contract can come to an end in many ways (expiry, performance, by agreement, etc). This article looks at contracts being ended by termination. The termination of a contract excuses all parties from further (primary) obligations after the termination date

Termination can occur in more than one way: under a contract clause or by common law (non-statutory law), for example by accepting repudiatory breach (a breach that is so severe it goes to the heart of the contract).

Before terminating a contract, first consider if an on-going relationship is necessary or desirable. If this is the case, an alternative solution to terminating a contract may be appropriate, in some cases, it may even be possible to vary (alter) a contract.

However, if as a business you do decide to terminate, you must approach this with caution.

Steps to take:

  1. Consider your position careful – gather all evidence relevant to the contractual relationship;
  2. The legal grounds for termination will need to be assessed;
  3. Follow the clause on termination if there is one in the contract. If there isn’t, you will be relying on an implied termination clause.
  4. Comply with procedural requirements for giving notice of termination (including reviewing the notice provisions of a contract, carefully); and
  5. Document the process (including reasons for termination) fully.

Terminating a contract can be a complex process – wrongful termination can result in a breach of a contract which can expose businesses to a claim for damages or they could face termination themselves. It is advisable to seek legal advice before seeking to terminate a contract.

As a not-for-profit law firm, we can provide free legal advice to businesses to help you achieve your business goals.

If you require legal advice for drafting, ending or varying a contract or have a commercial contract dispute that needs resolving, contact Rebecca Draper on 0114 225 3082 or email: r.draper@shulaw.co.uk.

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