How To Terminate A Contract With A Client

When you run a business, each client is valuable. However, at some point you might find yourself in a scenario where you can no longer continue your relationship with a particular client. When this happens, you want to make sure that you're going about things the right way so you’re not getting your business into any legal trouble.

Let’s take a look at what you might need to know when you are ending a contract with a client.

Terminating A Contract With A Client

When we think of terminating a contract, we usually mean ending that contract entirely and moving on from it. Most of us have been in this scenario, we’ve all cancelled gym memberships, changed to a different phone service provider or ended our rental agreements.

As a business owner. Contracts are going to be something you come across pretty frequently. You’re likely aware of the steps you need to take when signing a contract. However, sometimes we get so caught up with a new agreement, we forget to consider what happens if we ever need to end that agreement. Unfortunately, it’s something that is necessary to think about. Being prepared for terminating a contract with a client can make the difference between a headache and a bullet dodged.

When Can I End My Contract With A Client?

There’s a number of different reasons why it may not be working out with a client. Perhaps external factors have influenced the contract, they’ve broken part of their deal or you are no longer able to carry out the services that were once promised. The reason for the contract ending will determine your next steps, so it’s important to figure out your reasoning.

Some of the main ways a contract with a client may come to an end include:

• Frustration
• Breach of contract
• Convenience
• Performance
• Agreement

Most contracts will end by performance. This means, both parties have completed their obligations to one another and the contract has naturally come to an end. If you want to end a contract before both parties have performed their duties, you might be able to do this by agreement with the other party. An agreement is simply where you mutually decide to part ways with each other. If you’re doing this, it’s a good idea to sign a Deed of Termination.

You can also end a contract by convenience. This involves utilising a clause in the contract that allows the contract to end with a particular period of notice. Convenience will depend entirely on the pre existing contract you have in place with your client, so chatting to a legal expert to get a good grasp of your rights and obligations is recommended.

Contracts can end due to frustration as well. A contract ending by frustration means that something has happened externally which will prevent one or both parties from carrying out their obligations. For example, a natural disaster might prevent a carrier from getting certain goods delivered by the agreed upon date.

Finally, a breach of contract can also be grounds to end a contract. However, it’s important to be careful here. While a breach of contract can warrant the end of contract, it may also simply entitle the aggrieved party to damages rather than a suspension of the whole contract. The outcome of a breach of contract will depend on the nature and severity of a breach, so it’s best to chat to a legal professional before you do anything.

What Are The Ways I Can Terminate A Contract With A Client?

Once you figure out your reasons for terminating a contract, you’ll need to move ahead with the actual process. There’s a couple of things that will need to be sorted out, such as how you will communicate ending the relationship with your client and the things that will need to be done first. It’s often best to get everything in writing and refer to your legal agreement.

Let’s discuss this in more detail below.

Termination Clauses In Commercial Contracts

Generally, the contract you have in place with your client will determine whether you can end the contract, how you will do this and with what period of notice. This is usually known as a termination clause.

So, the first place you’ll need to start is there. Some of the key things you need to keep an eye out for is:

• The notice period
• Outstanding payments and fees of any kind
• The type of communication expected i.e letter or telephone call

Contract Termination Letter To A Client

When you’re ending a contract with a client, writing a termination letter is something you might want to look into. There’s a couple of reasons for this. For starters, as a law firm we always advocate for having things in writing. Secondly, it’s a great way to keep things on record which might come in handy later.

It’s best to get a legal professional to help out with this one. Generally, a termination letter to a client will cover matters such as:

• The date the contract is expected to end
• Any ongoing or wrap up tasks
• Remaining fees and payments
• Additional resources or referrals

It’s important to have a letter that clearly states your intentions so there’s no confusion. At the same time, it’s important to end things on a polite and positive note. A good legal expert will know the correct balance to strike, we recommend getting in touch with one of ours today.

Can You Terminate A Client Without A Clause In A Commercial Contract?

Terminating a client without a clause in a commercial contract can be tricky. You’ll want to tread carefully here, as you could end up inviting legal trouble for your business. A legal professional can take a look at your unique circumstances and provide the right advice. Our experts at Sprintlaw are always here to help.

We always recommend having a termination clause in your client contract to make things easier on your business. If you are thinking of entering into a relationship with a client, speak to one of our legal experts today, so they can get your contracts set up in a way that best protects your business. 

Key Takeaways

When you enter into a relationship with a client, it is natural to want things to go well for both parties. However, sometimes the circumstances can change. It’s best to make sure the contracts you have with your clients are prepared for any curve balls that are thrown. This way, you have a solid exit strategy. To summarise what we’ve discussed:

• Before you enter into a contract with a client, it’s wise to think about what might happen if you need to terminate the contract
• There’s a number of ways a contract might terminate, such as a frustration or mutual agreement between both parties
• Generally, the legal agreement you have with your client should contain a termination clause
• It’s important to follow this clause perfectly to avoid legal troubles
• If you agreement doesn’t have a clause, seek professional legal advice
• It’s always best to terminate a contract in writing
• Get in touch with our legal experts to draft your contracts so they can tailor the termination clause to your business’s needs

If you would like a consultation on your contracts with clients, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.