Terminating a contract is rarely a pleasant responsibility because you are saying that something you agreed and planned to do or have someone else do is not going to happen. Often, your business or the person or business you contracted with may lose expected income or money and time already invested into the contracted project.
The primary reason to worry about etiquette when terminating a contract is so your business maintains its reputation and so you do not end a relationship in a permanent way with a company or person you may need in the future. For this reason, before terminating a contract, make sure termination is your only option. Communication is key. If you are providing or being provided goods or services and a problem surfaces, let the company or individual with whom you have the contract know and try to come up with a solution together. If no solution is possible, proceed with terminating the contract.
If you contract for a project that turns out to be impossible, you can terminate the contract for “impossibility of performance.” Terminate a contract that contains fraud, misrepresentations or mistakes. End a contract for “breach” if the contract is with a company or person who impedes your efforts, fails to meet obligations or does something he was not supposed to do. Many contracts outline terms under which you or the other party may terminate the contract. If these terms are met, you can terminate the contract legally.
If the person with whom you want to terminate the contract provides services for you on your premises and has standard working hours, handle the contract termination the same way you would handle firing an employee. Meet with the contractor in private to avoid embarrassing him. Have a second person present at the meeting as a witness and in case things go awry. Clearly state the reasons you are choosing to terminate the contract. If the contractor did a great job and you are terminating her for reasons beyond her control, let her know that you are willing to recommend her in the future. Thank the contractor for his work and have him escorted out of the building. If the worker on your premises came through an agency, do not meet with him. In that situation, your contract is with the agency, not the worker. Contact the agency to terminate the contract. The agency will notify the worker about the contract termination.
The formal way to terminate a contract is with a contract termination letter. Write a contract termination letter even if you communicate the termination in other ways, such as a meeting or phone call. Write the letter in a standard business format. Include the contract termination date, reason you are terminating the contract and why it is legal for you to terminate the contract. If you had a positive experience with the business or person you are terminating the contract with, say so in the letter, but beyond that, stick to the facts.
