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