Can You End a Contract Without Ending a Business Relationship?

Can You End a Contract Without Ending a Business Relationship?

by admin
June 26, 2019

Your company may need to terminate a contract for any number of reasons. Is it possible to maintain a business relationship with another organization after ending a contract?


It’s a small world, and you never know when you will need to work with a vendor again, or you never know where the individuals you work with at one vendor will turn up later on.

If you handle the contract termination professionally, you can preserve the underlying business relationship. However, you need to remember you can only control your actions. You cannot control the reactions of the other party.


Tone Matters

The words you use and the way you couch those words will set the tone for the relationship going forward. Being professional doesn’t mean being cold or brusque. You should still be polite in all of your communications.

Don’t cancel a contract out of anger, even if the other party has failed to uphold their part of the deal.

State the Facts

One mistake some contract managers make in trying to salvage a business relationship is to be too nice. Instead of giving the real reason for the termination, they tell the vendor that they did a great job, but the company needs to move in another direction.

If there has been a breach of contract, claiming the vendor did a good job could hurt your company if there is any litigation.

You should stick to the facts. But, you should try and state the facts without getting personal or accusatory. You shouldn’t make legal conclusions in your communications.

Also Read  4 Dangers of Having Multiple Contract Repositories in One Company

Instead of stating that the vendor breached the contract, you should simply state that you are terminating the contract because the vendor’s failure to make the last delivery caused the company to look elsewhere to fulfill its needs.

Explain the Numbers

Numbers have a powerful psychological effect. Numbers are seen as neutral. People are also more likely to agree with a statement backed up with numbers. Explain the numbers behind the contract termination.

Make sure you are being honest, and not fudging the numbers to make the termination easier to take. You need to remember anything you communicate to the other party could be used in court.

Get online in minutes, implement in hours, realize ROI in weeks! Easy-to-use, helps you increase productivity, contracts & revenue. Available anywhere, anytime & on any device.
Try a Free Demo today!

Complete Your Obligations

If you want to salvage a business relationship, make sure to tie up loose ends quickly. Complete all of your outstanding obligations, including making any payments that are still outstanding. The cleaner and quicker the break, the more likely you will be able to do business with the other party in the future.

Nurture Your Connection

Business relationships aren’t about companies—they are about people. To maintain a business relationship, you need to nurture your connection to the people on the other side.

If your organization sends out cards or small gifts at the end of the year, include the contacts at the company that you terminated the contract with. If the relationship is important, send an email a month after the termination to check in on the people you worked with.

Also Read  Contract Management Resolutions for 2021 [Modernize your contract management]

These small personal actions will help keep the business relationship alive because it shows the decision wasn’t personal—it was just business.

Related Stories

March 9, 2020

How to Audit Government Contracts

May 29, 2019

Use These 8 KPIs to Manage Contract Performance

By focusing on these 8 KPIs in your contract management, you will limit your losses, recapture lost revenue, and find new efficiencies in your organization