How to Break a Client Contract

by Legal Goodness July 05, 2022

Everything must come to an end at some point, but your client contract may have to end sooner than expected.

All business isn't good business and sometimes you need to exit a business arrangement immediately but are uncertain about how to do so as painlessly as possible.

Let's look at how you can break a contract with your client if necessary.

Did They Do Something Wrong?

First consider why you're breaking your agreement with your client. Did they breach your agreement in some way?

For instance, perhaps they stopped paying you, ignored your requests for communication or are difficult to work with.

If that's the case, check your client agreement to see whether you can terminate for cause because your client is in breach of the contract.

If the contract states that they agreed to pay you a certain amount by a certain time and they haven't held up their end of the bargain, they could be considered "in breach" enabling you to terminate the contract.

They may also be in breach if they stop communicating with you altogether!

This is called terminating "for cause" because if your contract allows it, you have a right to end the agreement if the other party fails to adhere to material or necessary requirements in the agreement.

It's Not You, It's Me

OK, having the ability to break an agreement for cause is great if the client does something wrong but what if it's not about them? What if YOU need out?

Let's face it, there may be occasions when you're the one that has to end the relationship.

Maybe you took on too much work and can't fit this client in. Perhaps, you charged too little for far too much work.

Or you don't have the time, an emergency arises, you're winding down this side of your business...the reasons are endless.

Sometimes you just need an out.

If that's the case, look to your client agreement for a "no cause" or "without cause" section. It's usually in the termination clause.

It typically states that you can terminate the contract for any reason with a certain number of days written notice to the other party.

It may look something like this:

This Agreement may be terminated by either party upon 10 calendar days prior written notice to the other party.

So if you wish to terminate your agreement on July 11th, then you need to notify your client in writing by July 1st.

This is the simplest way to terminate, which is why I generally prefer no cause termination clauses in my templates. It's not the best type of clause for every type of agreement, but for the most part, if you will be paid up until the date of termination, it generally works.

Termination Clause

No matter which method you use to end the contract, be sure to check the termination clause closely.

It will let you know whether you can cancel with or without cause. It will tell you how much notice to give.

It should also state that you will be paid up until the date of cancellation and that any proprietary or confidential information will be returned to the other party.

So if you have property of your client that you were using to deliver the project, be sure to return it within the time frame given in the termination clause.

Negotiate Your Exit

Let's say you've done all of the above. But maybe the client didn't do anything wrong so you cannot terminate for cause.

You checked your agreement and it doesn't allow you to terminate without cause (no easy way out in this case).

Or, you can get out of the agreement but it's after 30 days written notice and you want out now.

Then what?

Negotiate your exit! That is, work with the client to make a clean break as simply and quickly as possible.

This may look like bargaining for 5, 10 or 15 days to wrap things up before ending the agreement depending on what, if anything remains to be done by either party.

If they owe you another payment, you can negotiate to be paid less, return some of the deposit, etc. if they will be willing to end the contract earlier.

Or, see if you can deliver what you promised earlier so that there is no need to wait for the full 30 days to end.

There are a number of ways you can do this but think about what your bottom line is first before reaching out to the client.

Put it All in Writing

Last but never least, however the agreement will terminate, get it all down in writing.

If you are terminate without cause, send the notice via overnight mail, certified mail or however your contract says you must send notice. My agreements include email as an option due to convenience but not all do.

Check the contract to see how to give notice. I prefer certified mail with tracking with email if that is allowed in the agreement or if the contract doesn't mention how it must be delivered.

If you have a good working relationship or you're negotiating your exit, civility and consideration can go a long way.

Have a conversation first, see what you can agree upon and then send the termination letter based on what was decided.

If it's a hostile situation, be sure to document everything (actually do that in any situation) and send the termination letter no matter the cause or who is in breach.

If you have to cancel, regardless of the circumstance the termination letter should be sent so that it is clear when the services have stopped.

At this point, in most cases that will be the end of it as long as payment is received for services rendered and you have delivered what was promised until that date or refunded the money accordingly.

If the client insists on services or declares that you are in breach because of the way your contract is written, contact a business attorney for advisement in resolving the situation.