Striking the match: how to terminate contracts without getting burned

Termination is a decisive step. A defective notice can unravel your strategy, hand the other side leverage, damage relationships and even amount to wrongful repudiation.

To minimise risk, approach termination carefully – from choosing the correct legal basis to serving the notice exactly as the contract requires.

Choose the right basis

Before drafting anything, make sure you have the right to terminate. You may have a choice between express contractual rights or common law rights. These routes can lead to different remedies and require different preconditions.

Notices must be clear, consistent and compliant. Even if you have a right to terminate for convenience, you still need to comply with the notice provisions. If termination is based on breach, check that any prerequisite default notice and the cure period have been satisfied.

Draft with precision

A termination notice must include certain things. Identify the contractual clause or common law basis you are relying on, specify the breach or event of default where required, state the effective termination date and expressly reserve rights – including the right to rely on alternative or additional grounds known or later discovered.

If multiple termination provisions carry different consequences, be explicit about which one you are invoking. Courts will read your letter objectively; your intention is irrelevant. If you want to preserve common law damages, make that clear.

Serve strictly in accordance with the notices clause

Even a perfectly reasoned notice fails if not validly served. Scrutinise the notices clause and follow it precisely. Pay particular attention to role‑based addressees, multiple required recipients and any specified electronic addresses.

Only depart from the clause where the contract’s language and context clearly permit it – and even then, proceed with caution. If time is of the essence, be particularly careful.

Where a breach notice and cure period are required, ensure the default notice clearly triggers the cure window and is served in the manner required for that step, which may differ from the ultimate termination notice.

Preserve remedies and manage settlement

Termination and remedies are closely linked. You need to think carefully about what you want to recover and what your losses are, and check whether these have been excluded – usually in a limitation of liability clause.

If you rely solely on a contractual mechanism that limits recovery, you may lose damages otherwise available at common law. Keep settlement proposals separate. Use “without prejudice save as to costs” correspondence if you have a dispute, intend to make an offer to resolve liabilities promptly and want to avoid contaminating the notice itself with privileged content.

Common pitfalls and safeguards

The most frequent mistakes are procedural: using the wrong service method, omitting a required recipient or missing a cure step. Failing to serve notice correctly or in time to prevent automatic renewal is also a common mishap.

Build a checklist against the contract, map the sequence (default notice, cure period, then termination) and seek legal advice to confirm compliance with formal requirements. In urgent cases, consider dual service by all permitted methods and at all specified addresses, and include fallback wording that accepts repudiation at common law as an alternative.

Choose the right ground, draft clearly and serve impeccably. The cost of getting it wrong is measured in leverage, damages and time; the payoff for getting it right is finality and a defensible route to recovery.