Writing a Business Contract Termination Letter [with Sample]

Contracts are legally binding agreements between two parties for the exchange of goods or services. 

If the contract is no longer meeting the requirements for with it was intended, it may be terminated. 

Businesses and professionals sign contracts with many clients for various purposes, and if they want to cancel the contract, the first step is to write a termination of contract letter to the client. 

In most cases, when a contract is first proposed, it will contain the conditions for termination on which both parties agree. 

Notice Of Contract Termination

A termination of contract letter may also be called a notice of contract termination and a notice of cancellation of contract. 

It is wise to make the letter short and to the point. It is not necessary for the letter to contain multiple reasons for the contract termination. 

As long as any terms and conditions give in the contract for termination are met, one or at the most two reasons is enough. 

The writer should also be careful not to make any statements or admissions in writing that could be used against them in court proceedings.

Terminating A Contract

When terminating a contract, the person should make sure they know all the terms and conditions for terminating that particular contract. 

There may be a time frame within which the letter must be delivered, a particular person to whom the letter must be addressed, and there may be specific information about the termination that must be included in the letter, especially if money is involved such as the return of a deposit, outstanding fees and any cancellation fees.

For example, the terms of the contract may state that no refund will be provided if the contract is cancelled or that the person cancelling has to continue to make payments even if they cancel the contract. 

In some cases, both parties may mutually agree to the termination of the contract. 

Illegally Terminating A Contract

If the contract is illegally terminated, there is the possibility the other party could file a court case against the person who cancelled the contract. 

For this reason, it’s important to follow the terms and conditions for terminating a contract.

The following points should be included in the letter:

• The services for which the contract is being terminated
• The reasons for the termination
• An account number if applicable
• The date on which the termination is effective
• The termination is in accordance with the terms of the contract
• The reason for termination
• Any payments due if applicable

The letter should be polite even if the writer is angry with the client. It is not professional to call the client a liar or use other angry or combative language. 

Any professional communication should always be polite and courteous because it is a business transaction, but a termination letter should be polite because there is always the chance the parties may want to do business again in the future.

Use A Conciliatory Tone

A conciliatory tone will also get better results from the other party and not send them into anger and the desire to go to court. 

The letter should be drafted to avoid any loopholes which could allow the other party to sue for damages or breach of contract.

Below are sample termination of contract letters. Since it is a formal notification, it should be written in standard business letter style. 

If the company or person has letterhead, that should be used. If the letterhead has the address of the person or company, that address need not be included.

In order for the writer to have proof that the letter was sent on a specific date as per the conditions of the contract and that the letter was received, it is recommended to send it by certified mail with return receipt requested.

Sample 1 – Termination Of Contract Letter

Date
Recipient Name
Company Name
Recipient Address

Re: Construction Contract Termination

Dear Mr. Recipient:

This correspondence is sent in accordance with sections 6 and 7 of the contract between SENDER and RECIPIENT. 

Over the last two months, it has become clear that the construction project at (SENDER’S ADDRESS) is not going to be finished with the efficiency and quality that were promised in the original contract. Accordingly, RECIPIENT is hereby notified of the termination of this contract.

Specifically, SENDER became aware on DATE of certain defects in the quality of the cabinetry and counter tops that were installed at the above-mentioned address.

RECIPIENT was informed of the problems the same day. In accordance with the terms of the contract, RECIPIENT promised to fix the issues within 30 calendar days. 

It is now 15 days after the expiration of that 30 calendar day period, and no further work has been completed. 

Sections 6 and 7 of the contract stipulate that SENDER may terminate the contract if issues brought to the attention of RECIPIENT are not resolved within 30 calendar days.

Accordingly, this contract is terminated, and SENDER is not responsible for any balance due to RECIPIENT.

Please sign a copy of this letter and return it to us within seven days of receipt.

Very truly yours,

Sender’s signature

Sample 2 – Termination Of Contract Letter

Name of Client
Address of Client
City, State, Zip Code

DATE

Name of Agent or Broker
Name of Real Estate Company
Address of Real Estate Company
City, State, Zip Code

RE: Termination of real estate contract

Dear Name of Agent of Broker:

This letter is a formal request to terminate the contract between Name of Real Estate Company and myself for selling the house at Address of House. 

I entered into the contract with you on DATE, and it specifically states that you would show the house to potential buyers at least three times per month. 

You have not shown the house even once for the past two months, which, according to the termination clause on the contract, entitles me to terminate it. I would like to try to sell the house myself.

Kindly sign the enclosed termination document and return it to me by DATE. If you have any questions, I can be reached at Phone Number or at Email Address.

Sincerely,
Signature of Client
Printed Name of Client
List of Enclosures: Signed termination document

Sample 3 – Termination Of Contract Letter

LETTERHEAD

DATE

Name of Client
Name of Business of Client
Address of Client
City, State, Zip Code

RE: Termination of contract for SPECIFIC SERVICES

Dear Name of Client:

This letter is formal notification that NAME OF PROPERTY MANAGEMENT COMPANY will no longer be maintaining the property at ADDRESS. 

We have regularly maintained the property including the landscaping and repairs and maintenance for that past 18 months, however after the first year, we have not received payment for services.

I have enclosed copies of the unpaid invoices of the last two quarters. We sent two reminders, of which I have enclosed copies, and received no response.

As of DATE, we are no longer contracted to continue the property management of ADDRESS. We have followed the terms and conditions set down in the contract for cancellation of said contract.

The company will be pursuing the unpaid bills through legal means. If you have any questions, I can be reached at Phone Number or Email Address.

Sincerely,

Signature of Company Representative
Printed Name of Company Representative
List of Enclosures: Copies of Invoices and Request for Payment Letters

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