What is a Mutual Termination of Contract Letter?

A Mutual Termination of Contract Letter is an acknowledgment of a contract between two parties that has been mutually terminated.


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To start, a Mutual Termination of Contract Letter is a letter sent as an acknowledgment of the termination of a contract between two parties. And, just as it sounds, where the termination is mutually agreed upon.

In essence, it is a letter that is good practice to send as it helps facilitate good terms between the two parties despite the termination.

What is a Mutual Termination of Contract Letter?

Mutual Termination of Contract Letter

Simply put, this is a letter sent by one party of a contract to another to acknowledge the mutual termination of a contract. 

Essentially, when a contract comes to termination by mutual agreement between the parties, sending A Mutual Termination of Contract letter serves as an acknowledgment of the ending of any obligations. Additionally, it provides an official record of the fact that the relevant contract has come to a close by mutual decision. Importantly, this records that there is no further obligation on either party under that contract.

Basically, it is a courtesy letter that helps facilitate good terms between the two parties despite the termination. As well as providing a record that there will be no further discussions or legal disputes forthcoming.

When to use a Mutual Termination of Contract Letter? 

Usually, you’ll use this letter if an agreement is no longer effective. Or, if the parties have ceased business operations. Or, if the agreement can no longer be faithfully performed. Often, this is when the parties may decide to formally terminate the agreement in writing. Subsequently, when both parties agree under mutual consent to the termination, use the Mutual Termination of Contract Letter.

Conversely, when this decision is enforced as a right under the agreement by only one party, use a Letter ending a contract. 

What is a deed of mutual termination?

It is a separate written binding legal document that confirms that both parties mentioned in the contract intend to mutually cancel the original signed contract.

The responsibilities and obligations of all the parties under the contract will be brought to an end by the deed. Further, depending upon the terms of the deed, it will also relieve the parties of having to carry out any further obligations which would have been required under the contract in the future.

When should you use a deed of mutual termination?

You can use a deed of mutual termination in the following situations:

  • When both parties agree to end the contract but something is still pending under the contract, it could be payment, rectification of defects and so on.
  • When either of the party does not want to trigger any clause which could arise from the termination.
  • The initial contract does not grant the right to terminate.

Procedure for Mutual Termination of Contract Letter

  • Set a meeting and request the attendance of all who are required.
  • Draft a mutual termination contract letter. Include required details such as terms and conditions along with the date it is in effect.
  • Submit and get approval for the termination letter. Note that in certain cases a hand-signed document might be required.
  • Ensure that there is a withdrawal period of at least 15 working days.
  • Terminate the contract on the agreed-upon date.

Conclusion

To sum up, this simple letter is the best way to acknowledge the mutual termination of a contract. You will use this letter to keep a record that there is an agreement to no longer have any further obligation to the other party.

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