No one wants to lose a client, but it happens. And when it happens, you need to be prepared with the documents you need to cancel a contract. Contracts should include a cancellation provision within the terms and conditions. There should be some place within the contract where it explains how either party can terminate the contract.
Since you (hopefully!) have already outlined the contract’s steps, you can now simply follow them.
NOTE: The theories provided below are for general contract purposes only. These theories will vary depending on your state law. It is highly advisable to consult with a local attorney to ensure you follow the letter of the law. Nothing is worse than having a contract backfire, resulting in a loss for the small business owner.
Inevitably life happens. Sometimes both parties want to cancel the contract, but mutual cancellation would also apply to several other scenarios.
For example, a need arises after entering into the contract for cancellation to occur. Your client may be moving away due to job relocation, or a female client may become pregnant, and not want to continue their membership or training.
With a signed contract, the path to end the relationship is already written down.
You can use a document entitled “Mutual Release and Rescission of Contract” or a document simply entitled “Cancellation of Contract”.
But, if you failed to put a cancellation provision in your contract, then you definitely need a cancellation of contract agreement to terminate the contract. It’s always the best practice to have everything in writing to avoid confusion and help with any potential litigation.
When it comes to contract litigation, it often comes down to a judge weighing two parties’ testimony, a “he said, she said” trial.
A written Cancellation of Contract form is a great evidentiary document to use to prove the terms and conditions of the cancellation. If your contract has a cancellation provision, then make sure any Cancellation of Contract form used mirrors the language contained in the original contract.
Send the confirmation of cancellation to the client via a registered method or other controlling required delivery method in the jurisdiction to make sure that you are covered.
What do you do if you want to avoid canceling a contract or having an item returned?
Unfortunately, some scenarios arise where a court may ignore the plain language of a contract provision. This occasionally happens with the “all sales are final” term. It is not unknown for a court to reform a contract and alter this term.
Additionally, there is the Cooling Off Rule used by the Federal Trade Commission AND some states. There may also be state laws voiding the “all sales final” provision.
This is why the inclusion of a severability clause is important as the severability clause would save the rest of the contract from becoming null and void.
A court may also set aside an “all sales final” provision if the client claims to be dissatisfied with the end product, even if the client has signed for and accepted the delivery.
You can attempt to save yourself time and money by utilizing the legal tools we have discussed. But, the bottom line is that you never truly know what action a court will take; you can only make an educated guess.
Having EVERYTHING in writing signed by the appropriate parties goes a long way in proving your case in the court’s eyes.
Sometimes customer service pays off
Have you ever had a really bad opinion of a company, but a really nice and understanding customer service representative talked you off the edge? Sometimes, customer service can change your mind, or that of your client’s.
Start by talking to your client; a conversation may prevent headaches down the road, and possibly even litigation. Remember, it is your business; run it how you want.
If you believe that a client has made a good faith effort to fulfill their part of the bargain but ultimately cannot, you do not have to keep their deposit or subsequent payments.
If you find yourself in this predicament, get our Cancellation of Contract Bundle. Every state is different and provisions for contracts are going to vary. Make sure you ask a local attorney to review the contract.