News & Insights

It is a sad truth that nothing in this world lasts forever (no matter how well some celebrities seem to age), and contractual relationships are no different. You may be looking to part ways with a supplier, customer or any other person or business for a variety of reasons; they’re no longer the best fit for your company, you’ve changed your own strategy or that they’re simply failing to meet up to their promises. Whatever your motivation, here are a few points to consider before taking any action:

Make sure you know your rights before you take any action:

If you wrongfully terminate the agreement you could provide the other party with rights to damages. Speak to a solicitor if you need to understand your legal options.

Read the contract, if you have an agreement in place then read through this carefully.

Do you have a right to terminate? In what circumstances? Do you have to give a certain period of notice? Does the contract automatically end after a certain amount of time? Make sure you follow these provisions.

Giving notice

Many agreements will set out how any notice should be given (such as whether or not a notice can be given by email). Notice may also be deemed to have been served a number of days after it was actually sent out and you will need to take this into account when calculating the date on which the contractual arrangement will come to an end. Again, make sure you comply with the terms of your agreement.

Understand your post-termination provisions (and the other party’s)

Check whether your contract places any rights or obligations upon either party. Do you have to return the other side’s confidential information? Are you prohibited from soliciting their staff for a specific period of time? Being aware of these obligations will help ensure that you do not inadvertently fall in breach of them.

Beware of TUPE

If employees of either party have dedicated all or the majority of their time to carrying out this particular contract (for example your security supplier has provided a number of individuals that work solely at your site) then there is a risk that the Transfer of Undertakings (Protection of Employment) Regulations 2006 will apply and that employment will transfer from one party to the other (or to the new service provider) upon termination of your current arrangement. Seek legal advice if you have any concerns that this might apply.

Try to get permission rather than forgiveness

If you think that bringing the contract to an end might lead to arguments or (worst of all) legal disputes then it is sometimes better to try to reach a mutual understanding with the other party rather than enter into litigation. You might well be able to sue for breach of contract, but are you prepared to incur the time and expense of issuing a claim? Sometimes the best way forward is to sit down with the other party and find a mutually agreeable way of ending the arrangement.

Written variations

If you agree to deal with termination in a way that contradicts the contract you originally signed (or you agree terms that were not included in your initial agreement) then make sure that these are set out in writing and signed by the parties, making it clear that this supercedes any previous arrangement. You will be well-advised to get a lawyer to prepare this document on your behalf.

Breakups can be difficult, especially if only one side wants to part ways, which is why they should always be dealt with carefully.

For further information, please contact one of Commercial Contracts experts.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.