1. About Service Contracts
2. Tips for Terminating a Service Contract

Updated October 21, 2020:

How to politely terminate a contract? If you need to cancel a service contract or consultant agreement, you want to do so as politely as possible, while remaining forceful. Failing to use clear language can put you in a legally vulnerable position, but being too forceful can cause the relationship to end on bad terms, meaning you wouldn't be able to work with the consultant or service provider again in the future.

About Service Contracts

Most people assume that because communications related to business are very formal, it can be hard to remain polite when ending a contract. Fortunately, this isn't the case, and it is actually possible to end a contract courteously. You should be sure that you aren't too friendly, however, as the message that you are ending the arrangement might be unclear, and you could expose yourself to legal liability. When canceling a contract, you should use clear, concise language so that there aren't any misunderstandings.

With a service contract, you can obtain several of your business's most important needs:

  • Communications tools, such as phone and internet service.
  • Maintenance needs, such as cleaning and landscaping.
  • Human resources
  • Legal services

When securing these services, you will need to sign a service contract. In some cases, you can arrange these services verbally. However, you should be aware that verbal contracts are just as binding as written contracts, and any communications between you and your service provider could provide proof that an agreement existed.

Tips for Terminating a Service Contract

If you want to terminate a service contract, you should closely read the agreement to make sure you understand its terms. Find out if there is a set end date for the agreement, and determine if there are any fees required for early termination. While a service provider won't be able to force you to fulfill the agreement, it can sue you for breach of contract and may be awarded damages.

Before you cancel your service contract, you should find a new provider so that there won't be a gap in your services. You shouldn't, however, sign a contract with your new provider until you're sure that you can terminate your existing contract. Also, you may not want to end your current agreement if the penalties and fees are so expensive that they would make it difficult to enter into a new contract.

Poor performance is the most common reason to cancel a service contract. If you want to terminate a contract for this reason, you should first get in touch with your service provider to see if there's a way to resolve the issue. Fixing a problem with your service is often much more cost-effective than terminating a contract, and your provider may even offer a discount to preserve the relationship.

If you're ready to terminate your service agreement, you should be sure to do so in writing. You can either send an email to your service provider or compose a termination letter on business stationery. You should sign this notification using both your official title and the name of your company. Signing using only your personal name may open you up to a lawsuit. Sending this notice by certified mail will provide proof that the service provider has received the termination notice.

You should begin your letter by stating clearly you are contacting the service provider in order to terminate the agreement. Include the contract number, if you have one, and state when you want the agreement to end. If the contract includes terms that allow for early termination, point your service provider to these terms.

You may be tempted to reassure your service provider that they've done a good job, or that his or her actions have nothing to do with why you want to end the contract. Resist this temptation, because anything that you say in the termination notice can be used against you in a future lawsuit. You should also avoid trying to justify the termination by stating that the service provider failed to perform their duties. If the provider can actually prove that they did uphold their end of the agreement, he or she may have grounds to sue you for breach of contract.

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