How to Terminate a Contract With a Client
Some relationships are meant to last and others, well…it’s important to know when it’s time to say goodbye.
I seriously thought Ryan and I were going to glow in the dark a few summers ago after I found the “pink drink” at Starbucks and brought one home for each of us.
One thing led to another, and this little pink drink turned us into pink drink monsters — we found ourselves turning to each other everyday thinking the same thing, “wanna go get a pink drink??”
But as much as we loved that sweet strawberry iced drink (or whatever it is that makes it pink lol), we started noticing how our stomachs hurt every time we drank one. We couldn’t really ignore the daily headaches or blood sugar crashes either lol.
Although it was hard, we knew it was time to end our summer love affair with our beloved pink drink. We rode out the withdrawals and went back to drinks that didn’t make us feel so icky or leave us glowing in the dark.
What’s this gotta do with helping you legally protect your business?
One of the best ways to legally protect yourself and your business is learning when it’s time to say see ya 👋 to a client relationship. Actually, I think it’s THE best legal tip I can give you. (Actually, the ultimate best legal tip is to try to avoid problem clients, which I teach you how to do inside the Ultimate Bundle™ — but after that, this is the next best legal tip).
Having a legit, professionally written signed contract is a crucial place to start your work with a customer, so pat yourself on the back for getting that right. (And if you’re a coach or an online service provider still in need of the right contracts to protect yourself and your work with your customers online, I’ve got you covered.)
Even if you were initially excited to work with a certain customer, sometimes client relationships don’t work out even if both parties agreed and it’s time say bye, bye, bye (I dive more into when clients are a pain in this podcast episode of On Your Terms™). How you say bye is just as important because that could impact you legally — so that’s what we’re going to focus on today.
All Good Things Come to an End
And the not so good things, too. Ending a contract might just happen organically—you fulfill your services, the customer pays you, everyone has upheld their end of the bargain and you part ways enriched and happily. Yay!
But what if it’s not so simple?
Contracts are legally binding agreements.
You can’t and shouldn’t just get out of one because you no longer feel inspired. A good, legally reason is needed to get out of it.
You also want to make sure you review the contract and that your client contract has a clause built into it that allows you to get out of it under certain circumstances (i.e., health issues, family emergencies, etc.) But you could also want to get out of the contract because your high-maintenance customer turns out to be incredibly difficult, and you can’t stomach losing sleep over their harmful antics. Or maybe a personal emergency pops up that stops you from being able to fulfill your end of the bargain.
On the other hand, it may be a customer who wants out. Perhaps their financial situation changes, and they can no longer afford your services. Or their expectations do not align with what you deliver, and now they’re unsatisfied and decide to terminate the contract. Finding the right client from the start can play into this as well.
When a contract is intentionally not honored by one party, it is called a breach of contract. For example, if you purchase a service but do not receive it, that’s a material breach of contract. Usually in that situation, the injured party has the right to seek monetary damages for her losses and get out of the contract, too.
So what we want to do is properly set the stage (in your contract) for when it is and isn’t OK to exit a contract and under what circumstances. That way, you don’t get slammed with a breach of contract lawsuit or a failure to deliver your end of the bargain.
How To Terminate A Contract With A Client
In a perfect world, you wouldn’t have to worry about ending a contract. To come as close as possible to this, review the contract, be as accurate and precise as possible about your timeline, services, deliverables, and pricing. Realistic expectations go a long way in setting up everyone for success.
But sometimes that doesn’t work, and that’s part of life, too. Just like it’s important to enter into a contract legally, it’s important to end one legally.
A contract is a legally binding document that spells out the terms and conditions of a working relationship—details of the services that will be provided, payment and deadlines. It should also include a termination clause, with specifics about how to get out of said contract should the need arise. That termination clause allows either party to exit legally and lays out the plan for doing so: it might stipulate that you need a termination letter with 30 days of notice, for example.
How To Write A Termination Of Contract Letter
Writing—or hiring an attorney to write—a contract cancellation letter is the safest way to go. Even if the contract allows for a verbal termination notice, a notice in writing provides solid evidence of your decision, and it’s always a good idea to have a written record.
Make sure your letter covers the basics:
· State the big idea: You will no longer require the other party’s services as of a certain termination date. Or, alternatively, if you’re the one cancelling a contract, that you’ll no longer provide services as of a certain date.
· Spell out the reasons you’re terminating the contract—keep this brief and to the point. If you had the proper clause in your contract that allows you to cancel at any time (but obviously not continue charging your client for services not rendered), then you don’t need to spell out your reasoning. Simply cite the paragraph/clause number you’re referring to in your agreement.
· If there is work still outstanding or ongoing, explain how you will wrap that up. If the client won’t be charged any future payments owed, it’s important to confirm that. If you’re either refunding them entirely or partially to represent the shorter term, that should also be explained.
· It can’t hurt to end on a positive note, thanking the other party. It’s always helpful to offer them additional resources or referrals to another person/business who’ll be able to better assist them at this time.
Tips for a Graceful Exit
How you handle the hard and unpleasant stuff is part of your brand, too. Although it’s true that you can’t make everyone happy, you can make sure you’re not doing certain things to make the person unhappy. For example, make sure the person feels like for what they paid, they got what they were owed. If there was anything they were supposed to receive but didn’t, you should either be stopping their additional payments or refunding them a portion of what they paid.
Here are some pro tips to keep in mind as you work on getting your termination ducks in a row:
· Give as much notice as possible.
· Offer your customer an alternative option if possible. Referrals to other professionals always helps.
· Don’t hit “send” when you’re angry. Wait to communicate when you’re feeling calm and centered. Even better, have a trusted colleague, friend or even your partner look over your communication to make sure it’s professional.
· A great goal to keep in mind is that both parties involved should be as satisfied as possible.
Even (or especially!) when you’re parting ways, it’s best to do it thoughtfully and gracefully. When in doubt, seek the help of an attorney who can guide you. You certainly don’t want to lose sleep at night worrying about being sued.
Free Legal Workshop
Speaking of sleeping peacefully and feeling super confident that your business is protected legally, come on in and watch my free legal workshop “5 Steps to Legally Protect & Grow Your Online Business”. You’ll get the 411 on solid contracts and a whole lot more—a great foundation for building your legally legit business. You can grab your spot right here and the best part is you’re only 60 minutes away from the peace of mind that comes with having a legally sound business!