Home / How to terminate a contract: common mistakes to avoid
3rd June 2026
Callum Duff, Solicitor
Terminating a contract is not always straightforward. If you fail to follow the contractual notice provisions or clearly communicate your intention to terminate, your termination may be invalid. In some cases, that can mean losing a deposit, remaining bound by the contract, or facing legal costs.
A recent case which Kuits were instructed on shows how costly it can be to terminate a contract incorrectly. An investment company lost a substantial deposit because it failed to follow the contract’s notice provisions when trying to bring the agreement to an end. It was also ordered to pay the other side’s legal costs.
The lesson is simple: if you want to terminate a commercial contract, you need to check your legal basis for terminating, follow the contractual procedure carefully and make sure your notice is clear. Getting it wrong can be an expensive mistake.
Kuits recently acted for a property development company defending a claim brought by an investment company. The investment company had tried to terminate a contract relating to the purchase of a newly developed property and sought the return of its deposit. The developer refused, and the investment company issued proceedings to recover the deposit, interest and costs.
The court held that the investment company had not taken the correct steps to terminate the contract. As a result, it was not entitled to recover its deposit. The developer later followed the correct contractual process, validly terminated the agreement and was entitled to keep both the deposit and the property.
Your right to terminate a contract may arise under the contract itself or under common law. It is important to understand the difference. Some contracts contain express termination clauses setting out when and how a party can end the agreement. In other cases, a right to terminate may arise because of a sufficiently serious breach.
In this case, the court found that the investment company did have a contractual right to terminate. The problem was not the existence of the right, but the fact that it failed to exercise that right correctly.
Before serving a contract termination notice, review the termination clause and any notice provisions carefully. Check where notice must be sent, how it must be served, when it can be given and whether any methods of service are excluded. If the contract sets out a process, that process should be followed exactly.
In the recent case, the contract stated that notice of termination could not be served by email. The investment company nevertheless sent its notice by email. The court decided that this did not comply with the contract, so the notice was ineffective and the contract was not terminated.
A valid notice to terminate a contract should be clear and unequivocal. It must make it obvious that you are bringing the contract to an end and should comply with any wording or service requirements set out in the agreement.
After the court found that the email had not validly terminated the contract, the investment company argued that a later Letter of Claim, which had been sent by post, should count as a valid notice of termination.
The court rejected that argument. It held that the Letter of Claim was not a valid termination notice because it was not clear and unequivocal in expressing an intention to terminate. Instead, it treated the contract as if it had already been terminated by the earlier email. That was not enough.
If you are thinking about terminating a contract, do not assume that sending an email or writing a letter will be enough. Check whether you have a contractual or common law right to terminate, review the notice provisions carefully and make sure your communication is valid, clear and served correctly. If you get the process wrong, you may lose valuable rights and expose yourself to a claim.
Only if the contract allows notice to be served by email. If the contract excludes email or specifies another method of service, using email may make the notice invalid.
An invalid termination may mean the contract remains in force, you lose the benefit of your termination rights or you face a claim for breach of contract, damages or costs.
In many cases, yes. Contract termination can have significant legal and financial consequences, particularly where there is a dispute about notice, breach or timing.
If you are considering terminating a commercial contract and want to avoid a costly mistake, get in touch with a member of the Kuits dispute resolution team. We can advise on your position, the correct termination process and the risks involved.