A contract should ideally allow for early termination (especially from the user’s point of view), by providing break clauses under which the contract may be ended. In addition, there should be provisions relating to early termination in the case of a breach e.g. where the supplier has failed to supply the services within the specified timeframe agreed.
There are many other reasons why a party may want to terminate a contract. For example:
- The contract is no longer profitable;
- The customer no longer needs the goods or services;
- The other party is insolvent; and/or
- One party has been bought by a competitor.
In light of the above, you may also want to include terms that reflect those circumstances.
You should think carefully about the practical consequences of termination as it could cause disruption and have an impact upon your budgets. In addition, you need to make sure that you have the right to terminate and that notice of termination is given in accordance with the notice provisions (which are also often found towards the end of the contract). If you terminate without the right to do so or termination has been carried out incorrectly then the other party could dispute your termination as being wrongful and bring a claim against you.
It is therefore vitally important that any contract termination is dealt with correctly, after having taken legal advice in relation to your position.
It is also important to note that a right that is not exercised may be lost and a financial claim may be lost with it hence why we have stressed the need to act promptly.
We would suggest keeping a record of when key contracts are due to expire – be that catering, telephony, photocopying, IT etc. This way you will have time to (1) shop around for alternatives before the term has ended; (2) negotiate a new and/or better contract with the current supplier; and/or (3) seek legal advice and possibly terminate.