Can you terminate your business contract?
Our commercial dispute lawyers regularly advise businesses how and when contracts can be terminated.
Although it seems straightforward, it can be a legal minefield and potentially high risk. The law might not necessarily reflect what you are expecting or even what you thought we were signing up for.
If you terminate too early or without a right to do so, this might allow the other side to bring an expensive claim against you.
Our expert commercial litigation solicitors have created these practical tips to try and help clarify some of the issues:
What does the contract say?
It is sensible to look at the small print. Sometimes contracts set out a clear process how and when you can terminate. It is important to follow the process set out if you have agreed the terms. If you are unsure what to do, you could check with the other side. If you misinterpret the provisions, the other side might disagree you have terminated properly and this might lead to a claim against you.
If there is no provision in the contract
If there is no clear right to terminate, it is worth asking the other side if they agree. If the other side refuse, and there are no clear provisions, you may be at risk by cancelling. It is worth taking some advice before taking any action. Spending a few hundred pounds on early legal advice is much more economic than if a six-figure dispute goes to court.
If the other side has breached a term of the contract
You may be able to terminate the contract and claim compensation if the other side has breached a key term of the contract that has taken much of the value of the contract away from you. However, not all terms allow you to terminate when breached and are afforded differing status in law. It is sensible to take advice.
If you are unhappy with the work, goods or service
Quite often people start off on good terms, and then lose faith in the other side's ability through a series of mistakes or issues and want to continue with someone else. If the other side has not undertaken work with due care, or supplied goods that are unsuitable, or has not provided reasonable service, you may be entitled to cancel the contract, or claim damages. This can be a matter of interpretation, and if disputed, it is sensible to take advice.
If the other side has mislead you
If the other side made a key term or statement to encourage you to enter the contract, but it later turned out to be untrue, for example "we are experts in this area" and it becomes apparent they are not, you may be able to cancel the contract altogether, or claim damages for misrepresentation. This can be a matter of interpretation and it helps to have a key statement in writing that you can point to. If the position is arguable, it is best to take advice.
Withholding payment
When something goes wrong in a contract and the other side is demanding payment for work you are not happy with, you might be tempted to withhold payment to use as leverage. Doing so is not always a good idea, as it might amount to a breach of the contract, and allow the other side to treat the contract as breached, and bring a claim against you. There is a balance to be struck and legal advice can assist.
Risk of staying on the fence
If you are considering whether or not to terminate for a long period after an issue arises and you permit the other side to continue work, you may lose the opportunity to terminate later on in law. It is better to take advice straight away to help you reach a decision and take prompt action if you wish to terminate.
Contact Commercial Disputes Lawyers London
At Saunders Law, we are committed to finding the best possible solution for our clients and will consider a broad range of methods to resolve commercial disputes. If court proceedings are necessary, we will use our extensive advocacy skills to tirelessly fight your corner, but we recognise that disputes can be time-consuming, expensive and harmful to business relations and are well equipped to advise on all mediation and conciliation methods where appropriate.
We provide clear and open advice regarding the costs involved, are adept at offering commercially attractive funding arrangements, which could include conditional fee arrangements, and we have excellent relationships with litigation funders. Call us on 02076324300 or make an enquiry online.