Common Mistakes to Avoid When Terminating a Business Contract
As an entrepreneur, you may excel at making deals. It can be easy to overlook the manner in which these agreements are terminated but giving this careful thought beforehand is just as important. How you terminate a contact will have a profound impact on your company’s legal standing and financial situation. It is not uncommon for business owners to make some common mistakes when dissolving contracts and these can result in stressful setbacks and costly disputes. One of our Utah business law attorneys explains the most common mistakes made, and how to avoid them below.
Failing to Include a Termination Clause
When it is time to write and sign a contract, it is easy to focus on the beginning of the business relationship. At this time, no one wants to think about the possibility of it ending. It does happen, though, which is why it is so important to include a termination clause in any contract. If the contract does not include a termination clause, you may find yourself stuck in an undesirable position. Worse, you may face a lawsuit for a breach if you try to simply walk away when you are not entitled to.
Not only is it important to include a termination clause in any business contract, it is just as critical that its terms are clear and not open to interpretation.
Not Following Proper Procedures
Even when a contract includes a strong termination clause, some business owners still fail to follow the procedures outlined in the agreement. Typical requirements in contracts include:
- Written notice
- Delivery methods for notice, such as certified mail
- Opportunities for the breaching party to remedy the issue
Failing to follow even a seemingly minor step in the procedure can void the termination, which can also lead to a claim for breach of contract.
Ignoring Financial Impacts
Terminating a contract will often have financial impacts. If an agreement has a ‘termination for convenience’ clause, you may be able to terminate the contract for any reason. These clauses often have wind-down costs and termination fees attached to them. Even when the termination is considered ‘for cause,’ there are often costs associated with ending a contract. These include the cost of damages sought by the other party, the cost of finding a new vendor, or the expense of completing the work internally.
When a contract is particularly burdensome, these costs may be worthwhile. However, it is critical to have a thorough understanding of them before deciding to terminate the agreement.
Our Business Law Attorneys in Utah Can Ensure No Mistakes are Made
Unfortunately, the above are just a few of the most common mistakes made when terminating a contract. At AGS Law, our Utah business law attorneys can review your contracts with you, help you navigate the process, and make sure no mistakes are made that could hurt you or your business. Call us today at 801-477-6144 or fill out our online form to request a consultation with one of our seasoned attorneys and to learn more about how we can help.
Source:
le.utah.gov/xcode/Title15/C15_1800010118000101.pdf
