In Short
- Contracts must be legally terminated on valid grounds, such as breach or fraud.
- Respond to client termination emails calmly and professionally, even if the termination is unfair.
- Consider legal action if the client breaches the contract before termination.
Tips for Businesses
Always check your contract's terms before responding to a termination email. If the termination is invalid, stay professional and ask for clarification. If necessary, explore legal options like compensation for work done or enforcing contract obligations.
Receiving a client termination email outlining that they no longer need your services is never a pleasant experience. However, there are appropriate ways to uphold your values and those of your business and maintain a positive relationship with your client. This article will outline how a client can terminate a contract and how best to respond if they do.
What Are Contracts?
Contracts are legal agreements between two parties, often for goods or services. A contract outlines the obligations and relationship between the two parties who sign the contract. It is vital to recognise that contracts and all the terms within them are legally binding.
How Can Contracts Be Terminated?
There are some general reasons for which a party can legally terminate a contract, including if:
- a party cannot fulfil their obligations, they can ask for termination of the contract to occur;
- the contract was entered into in circumstances that involve fraud, misrepresentation or mistake;
- a subject of the contract is or becomes illegal; and
- a party fails to perform the contract or violates the terms of the contract without justification.
There are also additional reasons that a contract termination may occur. However, this will vary between contracts and should be specified and agreed upon before signing. Additionally, contracts may contain a clause allowing either party to terminate the contract for any reason, alongside the notice period they must comply with.
When you receive a request for termination, you should examine your contract and ensure your client has terminated the contract on valid grounds.
Commercial Contracts Checklist
To protect your business, ensure supplier contracts meet your business' needs. Our free Commercial Contracts Checklist will help.
What if Your Client Illegally Terminates the Contract?
If the client terminates their contract on illegitimate grounds or breaches the contract before termination, you may wish to take further legal action. Depending on the terms of the contract, the client may have to make a final payment for any work you have completed under the contract or for any costs you have incurred before termination. If they refuse to do so, you may be able to take legal action against them. Further, if the court determines that they breached the contract before termination, the court may grant you a few remedies, including:
- Monetary Damages: This would put you back in the position you would be in if you did not sign the contract;
- Restitution: This places the innocent party in the position they were in before entering the contract. So, the breaching party must return any gains they made to the other party; and
- Specific Performance: If monetary damages are inappropriate, the court may ask your client to perform their obligations under the contract.
The client should outline the terms under which they wish to terminate the contract. They may not need to provide multiple reasons or give an in-depth explanation. However, they must provide a valid reason to terminate the contract. If not, you should respond and calmly ask why they would like to terminate the contract.
Calling the client a liar or commenting about them not understanding the contract is harmful. There is always the risk that a conflict like this will escalate to court unnecessarily, which will be costly and time-consuming for both parties.
Be Professional and Respectful in Your Response
Given you were in an arrangement with this client, it is likely that you will know and have spoken to them personally. Further, you will likely know what kind of person they are and how they engage in business. Some of their behaviour may indicate that this termination was coming. Moreover, you may have previously undergone negotiations about the terms of the contract or the performance of the contract. This gives you time to prepare mentally and respond in a measured way. However, if your client's termination letter blindsides you, ensure you do not send a response without carefully considering its tone and emotion.
Even if the client is wrong, you can maintain your reputation by responding in a calm, measured manner. Your response should remain polite and professional.
Provide Clarity on the Next Steps
When responding to a client termination email, it's crucial to provide clear guidance on the next steps in the process. Outline any remaining obligations for both parties, such as final payments, handover of work or materials, or confidentiality requirements. Specify timeframes for these actions and offer to schedule a final meeting if necessary.
If there are ongoing projects, explain how they will be wrapped up or transferred. Be sure to address any questions the client may have raised in their termination email. By providing a clear roadmap for concluding the business relationship, you demonstrate professionalism and help ensure a smooth transition for both parties.
Key Takeaways
You may be upset or uncomfortable if you receive a client termination email. However, you should not respond emotionally and say things that may reflect poorly on you or your business later. Understanding how and why the termination occurs is essential, as well as any legal obligations that may flow from this termination for both parties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
