A Termination of Purchase Agreement Letter is a letter written by an entity to another canceling an already established sales contract made between them.
A termination of purchase agreement letter sample outlines the reasons for the termination of the agreement and protects both the buyer and the seller from any responsibilities assigned to them in the purchase agreement.
Termination of purchase agreement letters are usually formal and should be written with utmost professionalism. The letter should be devoid of grammatical or syntax errors and should be attached with any supporting documents to help complete the termination process.
Purpose of a Termination Letter
A termination of purchase agreement letter establishes that each party in the transaction agrees to terminate the purchase agreement made mutually and seeks not to demand any form of compensation or any claim resulting from the termination of the purchase agreement. The termination of purchase agreement letter also provides details about any financial transactions that are to be made resulting from the termination and outlines who will receive the earnest money and how much they will receive.
Roles of Involved Parties
Each party involved in the termination of a purchase agreement usually has a defined role.
These parties are basically as follows:
- The party who writes the letter: The letter is written by a firm, company, or organization.
- One who receives it: The letter is received by another entity- producer, firm, or company.
- The agent or the third party holding the escrowed funds: Earnest money is held by an agent or a third party after the authorization of the termination and given to the party stated in the termination agreement.
When is the Termination Letter Required
The rules governing the use of purchase agreements usually vary from state to state. Generally, a purchase agreement can be terminated if both parties mutually agree to terminate the agreement or if either party breaches any clause in the purchase agreement.
The conditions that warrant termination of the purchase agreement are usually established in the purchase agreement. Some of the common situations that promulgate termination of a purchase agreement include failure to make payments as agreed, failure to deliver on goods/services as agreed, and change in the financial disposition of either party.
Writing the Termination of Purchase Agreement Letter
It is important to ensure that all key components of a termination agreement are well captured in the letter to avoid creating loopholes that may result in time-consuming and costly litigations.
Follow the following steps when preparing the terms of the purchase letter:
Step 1: download the template
Start by downloading our easy to use – customizable termination of purchase agreement letter templates. The templates are professionally designed and have all the key components that you will need to craft a great termination letter. After downloading, all you will have to do is fill in the required information and proofread to ensure that it is devoid of any errors.
Step 2: buyer/seller details
The next step after downloading the template is to fill in the details of the parties involved: the buyer and the seller. Make sure that the information you fill in is the same as in the purchase agreement. Also, provide the date on which the purchase agreement was signed for reference.
Step 3: provide monetary details
Provide information regarding the monetary details, i.e., the dollar amount that is due to either party resulting from the termination of the purchase. State how the funds will be availed to them. Also, if the funds will be held on an escrow, make sure to state the name of the escrow and the conditions that must be fulfilled for the funds to be released to either party.
Step 4: details of the terminated agreement
Provide a brief overview of why the purchase agreement has been terminated. State the reasons for termination, whether it was mutual termination, due to policy or clause violations, etc. This information is vital as it helps establish the letter’s purpose and creates a base for a logical argument should the issue proceed to court.
Step 5: signatures of all parties
All the parties involved in the purchase agreement, i.e., the seller, the buyer, and the agent or third party executing the letter, must sign the termination letter to show that they acknowledge the termination and that the information provided in the termination letter is true and accurate to the best of their knowledge.
Termination of Purchase Agreement Samples
Getting the right words to use when writing a termination letter can be challenging, especially if it is your first time crafting one. Here are two samples to help guide you in crafting the letter and how each key component should be included in the letter.
Sales and Marketing Director
21st August 2021
RE: Purchase Agreement Cancellation Letter
Dear Mary Jane,
We at ABC limited are writing this letter to regretfully inform you that we are terminating a purchase agreement between ABC limited and XYZ industries entered on the 24th July 2021 to supply Mint and Fabrication Material. The reason behind our decision is the complaints that our customers have raised regarding the quality of material we use for our end products obtained from your industries.
We have suffered a major setback at ABC limited, and we have realized a loss amounting to $509,999 and the amount is still growing by the day as our customers are returning more products due to poor quality. As enshrined in the purchase agreement, any direct loss made because of your raw material shall be reimbursed in full. Attached is a copy of the purchase agreement and the invoices and receipts for the purchase made. We have also attached a list of how the raw material was used in our products showing the quantities used. We hope for your full cooperation in this matter.
Sales and Marketing Director
Termination email sample
From: [email protected]
Subject: Purchase Agreement Cancellation Letter
We at _ are writing this letter to regretfully inform you that we are terminating a purchase agreement between ____ and ____ industries entered on the ___ for the supply of ________. The reason behind our decision is the complaints that ___________________.
We have suffered a major setback at ____ and we have realized a loss amounting to ______. As enshrined in the purchase agreement, any loss made that is directly because of your raw material shall be reimbursed in ____ [partially or full]. Attached is a copy of the purchase agreement and the invoices and receipts for the purchase made. We have also attached a __________. We hope for your full cooperation in this matter.
___ Sender’s name
____ Sender’s designation
____ Sender’s organization
Did you know?
The main difference between an email and a paper format letter is that when writing an email, you don’t have to include the date of writing the letter and your address line, which is the case for a paper format letter. Although most people prefer using an email to send such correspondences, it is advisable to use a paper format letter and send it via registered mail; that way, you will be able to retain a copy of the receipt to show that the recipient of the letter actually received it.
Following are some free downloadable termination of purchase agreement letter templates for you:
Termination Letter Writing Tips
There are a few essential writing considerations, which if kept in mind can make the termination of purchase agreement letter much more effective.
Here are five tips that you should consider when writing the purchase agreement cancellation letter:
- Begin the letter by establishing that the letter is meant to cancel an already enacted purchase agreement
- Provide valid reasons for the termination of the agreement
- Mention how either party will be compensated
- Attach all the relevant documents, including the purchase agreement and receipts issued during the purchase
- Proofread the letter to ensure that it is devoid of any grammatical or syntax mistakes
A termination of purchase agreement letter is written to cancel a purchase agreement made between one entity and another. The termination letter should be written with the utmost professionalism and should follow the standard business format. It should provide reasons for the cancellation, and the reason provided must be valid. All relevant documents must also be attached when sending the termination agreement to help ensure that the termination is effected successfully.