Termination of business contracts is an integral part of an existing business. When concluding an agreement, the parties usually do not count on its termination, but sometimes there is a need for such a step. In this article, we will consider the grounds and procedure for terminating business contracts in accordance with Ukrainian law.
What are the grounds for terminating business contracts?
As a general rule, termination of the contract can be made in:
- out of court (either with the consent of both parties, or in some cases – unilaterally);
- court order (if there are sufficient grounds).
However, there are several grounds that can become the basis for terminating a business contract. The most frequent of them:
- Violation of the terms of the contract. If one of the parties does not comply with the terms of the contract, the other party has the right to terminate it.
- Impossibility of performance of the contract. If certain circumstances make it impossible to perform the contract, the parties may agree to terminate it. This can happen, for example, due to changes in legislation, force majeure (natural disasters or economic crisis), impossibility to fulfill the contract for other objective reasons.
- Violation of the law. If the contract is concluded in violation of the law, the party may apply to the court with a claim to terminate it.
- Reaching the term of the contract. If the contract has a certain period of validity, then after its expiration, the contract is considered terminated if the parties do not intend to renew it.
- Mutual consent of the parties to terminate the contract. In this case, termination can be made by mutual agreement of the parties without additional procedures and recourse to the court.
What is the procedure for terminating business contracts?
The procedure for terminating a business contract is determined by the terms of the contract and the law. Typically, the contract provides for the procedure for notification of termination (in writing or orally), the term for notification of termination (mainly up to 30 days), liability for violation of the terms of the contract, as well as the conditions for the return of material assets.
If the contract does not contain the relevant conditions, then the general rule of the economic code applies, according to which the contract can be terminated by mutual agreement of the parties or by a court decision. In the event that the contract provides for the possibility of termination by one of the parties, the relevant party must notify the other party of its decision within the period specified in the contract or within the period agreed upon by the agreements.
For some types of business contracts, the following termination features are provided, for example:
- The property lease agreement may be terminated if the tenant violates the terms of the agreement or there are no grounds for extending the agreement.
- The contract of sale may be terminated in case of violation by one of the parties of the terms of the contract, failure to fulfill obligations or on other grounds provided for by law or agreement of the parties.
In each case, the termination of the business contract must be carried out in accordance with the requirements of the law and the terms of the contract.
If the parties nevertheless come to an agreement to terminate the contract, they must determine the terms of the relationship after termination, including the return of material assets, payment for services performed or goods provided, and other issues.
However, if they could not reach agreement on terminating the contract, then going to court may be the last way out. The court may decide to terminate the contract or to fulfill the violated terms of the contract.
It should also be noted that termination of the contract may have certain consequences. In particular, the parties may be obliged to compensate each other for damages resulting from the termination of the contract.
If you need help in terminating business contracts, please contact the law firm “Prikhodko and Partners”. Our team of qualified lawyers will provide you with legal advice on clarifying the terms of the contract and the procedure for terminating it, as well as assisting in the preparation of the necessary documentation and interaction with the other party to the contract.
The lawyers of our company have many years of experience in business contracts and other legal issues related to business. We are ready to help you at any time and provide professional legal support.