When starting a business, always keep in mind that you will get into various contractual agreements either with suppliers, vendors, and clients, to mention a few. These form of agreements typically requires one to sign into contracts, some of which are legal. Supplier contracts, for example, are a form of contractual agreement that’s essential for most businesses. After all, businesses rely on suppliers to provide them with various supplies. Unfortunately, not all business contracts do last.
At some point, disagreements or misunderstandings may occur, putting a hold on your business relationship. When you feel that your supplier contract isn’t working, the ideal thing to do is to write a supplier contract termination letter.
What is a Supplier Contract Termination Letter?
A Supplier Contract Termination Letter refers to a letter that is written by a business owner to cancel the supply agreement due to specific reasons that don’t conform to the contract terms and conditions. In many cases, the letters are written due to the supplier’s default to meet the contracts agreement. Even though a business owner can cancel the contract by phone or in person, it’s always necessary that you follow the cancellation with the termination letter. This not only makes you act professionally but also keeps you safe from any other legal confrontation.
What are Some of the Reasons for Terminating the Supplier Contract?
A Supplier Contract Termination Letter may be issued for various reasons. These may include:
Impossibility Of Performance
When either of the party involved in the contract (the company or the supplier) faces unforeseen circumstances rendering them impossible to complete the contract, then such a contract can be terminated under the impossibility of performance. Let’s take a look at this example.
Assuming you run a local motor vehicle assembly company. You have a contract with a foreign company to supply automobile spare parts to your company. But before long, a global pandemic strikes, paralyzing shipment. This makes your foreign supplier incapable of meeting supply terms. Therefore, you will have to send the Supplier Contract Termination Letter. This will legally terminate the supply contract under the impossibility of permanence since the supplier can no longer ship the goods as per the contract agreement.
Fraud and Scam
According to statistics, this is the leading cause of supplier contract termination. If you discover that the supplier is in any case involved in deceit, or fraudulent activity, then that’s a strong ground to write a Supplier Contract Termination Letter for them.
The other reason why you can send a Supplier Contract Termination Letter is when both the parties involved in a contract under a mistaken assumption. For example, assuming you have signed a supplies contract only to realize that both of you did a mistake. In order to terminate such contracts, you can write a Supplier Contract Termination Letter.
Breach of Contract
When upon entering into a contract, the supplier fails to meet the obligations assigned, then the business owner can legally terminate the contract by sending a Supplier Contract Termination Letter. With that said, it’s always important that both the parties allied to the supply contract to read between the lines the terms and conditions before signing into the contract. This will help them be aware of the requirements hence avoiding violations.
How to Write the Supplier Termination Letter
Before writing the Supplier Contract Termination Letter, always be sure to review the terms and conditions. Note that failure to abide by the contract policies can attract legal consequences, including financial penalties.
The following therefore are some guidelines to help you write a Supplier Contract Termination Letter effectively.
- Start with the company letterhead
At the top of your letter, you need to include the company’s letterhead. This should contain the company logo (not mandatory), the address, contact details, and the date of writing
- The recipient’s address
In this case, the recipient will be the supplier. Therefore, you should appropriately address the manager in charge of the supplies by indicating their name, address, and official contacts. An official salutation of greeting should follow this.
- Introduction paragraph
In this section, you need to express the reason why you are writing the letter and the date of termination. Be sure to state the reasons why you are terminating the contract.
- Body paragraphs
The body of the letter should contain an in-depth illustration of the termination of the contract. If possible, you can mention the specific sections of the supplier’s contract that reinforces your termination. Again, if there are any outstanding invoices, be sure to include it in the letter.
Conclude your letter by thanking the supplier for their services. Also, you can welcome any questions or concerns from the supplier. Finally, you can add your contacts, name, and signature.
Things to Consider
- The letter should be specific and direct to the point. Avoid being too wordy.
- The letter should use polite and professional language and tone. Even if the reason for termination is poor service or product delivery, you need to remain positive and refrain from expressing your anger.
- The reason for termination should be described in detail. Also, make sure you use a language that can easily be understood by the supplier.
- The date of termination must be indicated in the letter.
Sample of Supplier Contract Termination Letter
[Name of the sender]
[Address of the sender]
[Name of the supplier]
[Address of the supplier]
[City, State, Zip Code]
Subject: Soppier Contract Termination
Dear [Suppliers name]
I am writing this letter to formally and regretfully inform you about our decision to terminate our supplier contract. As of 1st October, we will no longer require you to supply users with the coffee berries. This is because we have changed our business strategy. As we are all aware, the pandemic has crippled our country’s economy. This has made it difficult for us to make profits. Therefore, we saw it as good to strategize by thinking in a different line of products.
I would like to express my gratitude for being prompt and offering satisfactory delivery over the time we worked together. Also, we are sincerely sorry for the inconvenience caused. Note that I am willing `give you a positive testimonial of your good service and product.
If you have any other questions, please don’t hesitate to contact me through [insert phone number]. We do wish you the best in your future endeavors.