Notice to terminate or suspend contract

To terminate a contract, you will need to notify the other party. Use our model notice to terminate as a guide.

End of the road

Business contracts may need to be suspended or terminated for many reasons, a recent example being the effects of the pandemic. Our model is based on the parties agreeing to terminate or suspend their contract, parting on good terms. The notice should reflect the agreement made between the parties, e.g. you may have agreed to waive the notice period or leave any outstanding monies owing on the account for the time being. You can adapt the model to include what you have agreed.

Check the terms

It is important to check to the terms of the contract in question and follow any termination/notice procedure. This ensures that you are entitled to terminate/suspend and have done so properly so you do not continue to incur liability under the contract. Things to watch out for include:

- circumstances in which termination/suspension is permitted

- the correct procedure to follow

- notice requirements; and

- any period of notice required.

Some contracts set out a particular format for the notice, in which case this should be used.

If the contract does not cover your proposed course of action, for example if it does not provide for a suspension, the contract’s terms can be varied with the agreement of all the parties. If you need to vary the terms, set out the variation in writing (following any variation procedure specified in the contract) and make sure that both parties sign it (see our guidance on Using Presigned Signature Clauses for how to ensure that signatures exchanged electronically form a valid contract).

Termination on insolvency

A common clause in commercial contracts enables one party to terminate if the other enters a formal insolvency procedure. Following a change in the law, suppliers of goods or services can no longer rely on these clauses. The aim of this ban is to help potentially viable businesses find a buyer or secure turnaround finance, which is much easier to do with essential suppliers in place. The ban applies regardless of when the contract was agreed. Suppliers must therefore exercise their rights to terminate with caution. The ban only applies to termination on insolvency clauses, so suppliers may still be able to rely on a right to terminate where the customer is in arrears, or may be able to negotiate an agreed termination instead.