Writing a Good Business Termination Letter (with Sample) Use this sample business termination letter as a template for your formal termination letter. Last updated on February 9th, 2019
There are times when business arrangements and contracts no longer serve their purpose. If this is the case, the business may want to terminate the agreement or contract.
There are a few guidelines to follow when writing a business termination letter, so any possible damages will be reduced to the minimum. The format of the letter is similar to a letter of request because the intention is to request the end of the business agreement.
Some circumstances that give a business or individual the right to terminate a business agreement are:
• An act of God that made it impossible for one party to fulfill the contract • Fraud or false representation either intentionally or unintentionally • Breach of contract where one party fails to comply with the contract • One party lacks the capacity to fulfill the contract • A contract for illegal purposes • A mutual mistake concerning a pertinent fact on the contract
Sending a Termination Letter
Before sending a termination letter, it is recommended to read the contract carefully to see if there are any provisions for cancellation.
For example, if the contract states that it can only be cancelled if the service is poor, the termination letter should not state that the service was good. Whatever the reasons that allows for cancellation, the letter should clearly state how the sender’s company is complying.
For contracts that are more than $10,000 in value, there will be a termination clause that sets the procedure for terminating the contract. This is true for long-term and automatically renewing contracts too.
It is recommended to try to terminate the business contract by mutual agreement. If both parties agree, they are free to terminate the contract.
If all parties have fully performed their obligations according to the contract or business agreement, then the contract is automatically terminated and no letter is necessary.
The letter should be clear and precise. The wording should not leave any room for misinterpretation. The sender may mention the reason for the termination, but the tone should be formal and neutral.
This isn’t the place to complain about poor service or unacceptable pricing or to criticize the company. If there are any outstanding payments to be made, the letter can request a final bill, or if they know the amount, they can enclose the payment.
Going Out of Business
If the business termination letter is intended to inform customers that the business is closing permanently, a different type of letter should be sent. It is important to tell people that a business is closing rather than simply shutting down with no explanation.
This letter will serve to announce the closure of the business and give the owner the opportunity to thank customers for their business, thank suppliers for their service, explain why the business is closing and give advanced warning to service providers.
The letter should include:
• The date the business will close • Communicate any actions such as pay outstanding bills • Give customers a place to direct questions
It is recommended to maintain a professional and positive relationship with customers and service providers whether a contract is being terminated or a business is being closed. In either case, it will be easier to begin again if there is a chance in the future to do business with these people.
Here is a sample business termination letter for cancelling a business agreement or contract. It should be written in standard business-style format and on the sender’s company letterhead. It should be sent by certified mail, so the sender has proof that the letter was received on a specific date.
If the contract is included, it should be a copy with the pertinent part highlighted and not the original document. All documents and correspondence connected with the termination should be kept for at least one year after termination.
Sample Business Termination Letter
Sender’s Name Sender’s Position in the Company Company’s Address City, State, Zip Code
Receiver’s Name Receiver’s Company Receiver’s Address City, State, Zip Code
RE: Termination of Contract Ref. Number NUMBER
Dear Name of Receiver,
This letter is to inform you that we are cancelling your services for maintaining the landscaping around our commercial building at ADDRESS. According to the contract signed on DATE, cancellation is allowed if your service is not performed regularly each week. It has been three weeks since you have attended to our gardens. I have enclosed a copy of our contract with you with the condition for cancellation highlighted.
If you have any questions, I can be reached at 555-123-4567 or at [email protected] I hope to receive confirmation of this letter within 10 days of you receiving it and to clear our account by the end of the month on DATE.
Thank you for your prompt attention.
Sincerely, Signature of Sender Printed Name of Sender List of Enclosures such as copy of contract with pertinent points highlighted