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Drafting termination letters (2)

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A contract termination letter is a letter indicating that one party to a contract wishes to end the agreement. Such letters must be drafted very carefully to avoid any loopholes (=a means of avoiding a rule, law or obligation) which may cause problems in the future or give rise to a cause of action for damages. It is also vitally important that the termination letter is in accordance with the proper method of termination set forth in the original contract.

Tips for drafting termination letters

When drafting a termination letter, it is tempting to use an angry and combative tone and/or language. After all, termination is (normally) the result of a party’s dissatisfaction with the results of an agreement or even a breach by the opposing party. However, it is important to maintain a polite tone when drafting such letters. It is possible that the party terminating this particular agreement will want to enter into a future agreement with the same party. For this reason, it is advisable to indicate that the terminating party is willing to do business with the other party in the future. Also, a polite tone may make it less likely that the other party will respond by bringing an immediate claim for damages. Finally, a conciliatory (=friendly and willing to make concessions) tone makes it more likely that the other party will try and re-negotiate the agreement and attempt to rectify any disagreements or differences between the parties.

It is also advisable to be as brief as possible and avoid stating multiple reasons why a party is terminating (unless you wish such reasons to form the basis for your own claim for damages based on the other party’s breach). Any statements or admissions you make formally in writing could be used against you in further proceedings.

Sample termination letter

Dear SirsThis letter is in reference to the Agreement that was executed on 31 March 2013 (the “Agreement”).Pursuant to Section 13.2 of the Agreement, we regretfully inform you that we wish to terminate the agreement in accordance with terms and conditions set forth. In accordance with our outstanding obligations, we will of course remit all remaining payments due under the contract. Such payments will be made not later than thirty (30) days pursuant to the Agreement.We very much look forward to doing business with you again in the near future and hope that we can enter into more profitable agreements.Yours sincerelyBarney Franklin
CEO
Wesson, Inc.

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