IACCM Contract Management Forum

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2018-05-15 13:47:24

Terminating a Contract

We have a contractor for a service and we are looking to part ways with the vendor. The contractor has emailed us and said they are no longer interested in performing the service and we are happy with letting them go. Can this email work as a means to terminate the contract?
Also from a legal aspect how do we handle this? Is a simple email back to them sufficient to confirm this termination arrangement?

Thanks in advance for your help.
 •  Telefonica  •   2018-05-15 17:52:16
There are a lot of aspects to consider here, for example:

are you buying a replacement service from another vendor? if so, do you need the current vendor to support transition to the new vendor?
does the current vendor need to return any confidential documents?
are all payments up to date?
are any contract penalties (service credits, LDs) outstanding?

Irrespective of the above, you need to formally terminate the contract, confirming that neither party has any liability to the other following termination, except, perhaps, confidentiality provisions and, potentially, any latent defect/warranty claims. Simply 'allowing' the vendor to walk away seems odd: you spent time (and therefore money) on-boarding them and agreeing a contract, it seems strange to end the relationship in this way.
 •  Neptune Marine Service Ltd  •   2018-05-16 01:14:24
Hi Dale,

What contract states with regards to email communication and authorized representative. If the contract only states that communications shall be in writing to the authorized representative. The next question that will arise is Governing Law of the contract. As some countries have adopted the United Nations Commission on International Trade Law (UNCITL) published its Model Law on Electronic Commerce in 1996 which states that actions will not be invalidated or discriminated against merely because they were conducted electronically and emails are considered as a message in "Writing"

So, make sure the message in "Writing" based on the governing law is communicated to the Authorised Representative.

For the balance checks, I agree with Steve Grange and that shall suffice.

Gaurav Seth
 •  MOJ  •   2018-05-16 14:46:50
Hey Dale,

I agree with Steve Grange. Create a formal Exit plan with the company to close off any outstanding liabilities to both parties. Regardless of each others 'mutual consent' to this. At the end of the that process formally close it off with a document. This will prevent anything coming back to bite you in the future.

 •  Siemens Pte Ltd  •   2018-05-17 09:52:18
Dear Dale,

I agree with Steve, Gaurav and Phil, They have covered multiple aspects which we have to look at before letting the vendor walk off as I believe in this case Vendor has no financial impact on them so easy for them to walk off without formal termination/closure of the contract. But from the moment you accept or let Vendor walk out all the responsibilities more of liabilities fall on your company.
 •  Resolute Corporate Services Pty Ltd As Agent for Société Des Mines de Syama S.A (SOMISY S.A)  •   2018-05-25 11:43:20
I think you should prepare an official document signed by both parties to legally and lawfully end this contract by a mutual agreement by both parties.
 •  Resolute Corporate Services Pty Ltd As Agent for Société Des Mines de Syama S.A (SOMISY S.A)  •   2018-05-25 11:43:54
I think you should prepare an official document signed by both parties to legally and lawfully end this contract by a mutual agreement by both parties. your message
 •  Virgin Money  •   2018-06-04 11:15:31
 •  Bristol Myers Squibb  •   2018-10-25 20:59:16
The first item to consider is to ensure to review the Services Agreement and review the Termination and Notices Section and any others that may come in to play when terminating an agreement. Are there a certain number of days after written notification that the services agreement will terminate? Are you terminating a master agreement and any ordering documents or SOWs or either or both? Do you need to provide notice to the contractor via email, mail, certified mail, overnight delivery? Does your agreement allow for electronic transmission communication as an acceptable method of communicating to make it legally binding in a notices provision?

I then also check to see if there are provisions such as Confidential Information/Materials or any other security items that need to be returned to your company that would need to be mentioned in a termination agreement or letter. Is there any confidential information, materials, laptop/pc, security badges and property that need to be returned and when, how and to whom? These are a few of a number of items may need to be addressed in a termination agreement along with ramp down services and whether there are any fees apart from standard fees that would need to be paid to considered. I have seen termination agreements be very simple with little to no instruction since the Services Agreement was simple straightforward agreement with little to be exchanged by way of CI, materials, goods, security, property and others that can run a few pages of negotiated ramp down services, transfer of services to another contractor or training and payment of ramp down costs at stake.
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