DRAFTING A LETTER FOR TERMINATION OF CONSULTANCY AGREEMENT

INTRODUCTION

Whenever two Parties work together, they work on the basis of the contractual agreed upon by both the parties agreeing to each other’s conditions for working together. Similarly, whenever a small or large organization is conducting a workshop with a consultancy in most cases it will be contractual work. The contract should express all the duties and responsibilities of the parties involved. So, the work so done in collaboration with consultancy can’t exist without any contract or agreement with the consultancy agency. The said agreement sets a guideline for the works to be followed by the consultancy based on clients' needs and demands. Consultants are often used by various firms for one-time or ongoing projects. Such consultants/ consultancy firms are majorly used by a company for tasks like marketing, software development, taxation, audit, etc. Termination of any such contract with the consultancy firms frees both the parties from any obligation, duties, responsibilities, answerability they have towards each other’s projects. Termination of a consultancy agreement may be initiated by any party for not wanting to continue such work they came into agreement with, due to various reason. In most cases, the firm tends to terminate the consultancy agreement at the when the project finishes and they don’t want to continue working with the consultancy firm if they are not satisfied by their work or if they don’t need any consultancy any further in near future.

LETTER FOR TERMINATION OF CONSULTANCY AGREEMENT

The various reasons for termination of a consultancy agreement can be:

1. If any party commits any breach (Material breach) to the terms of the agreement and fails to compensate for such breach within a given number of days;

2. If any part becomes insolvent and fails to pay their debts or any dues they have towards the other party;

3. The consultant may terminate the contract f the clients is unable or refuses to pay any payment due by him/her towards the consultant;

4. If any of the party is convicted with criminal charges;

5. If the consultant puts the client’s intellectual property at risk so the client can terminate the agreement;

6. Expiry of the term of the agreement;

7. If any fraudulent representation is found in context with service or any other subject related to and mentioned in the agreement;

8. If the consultant, his agent, or his employee engages in any act which is detrimental for the business of the company;

9. If any party has reasonable facts which shows the possibility of any conflict arising between the interest of the parties;

10. Upon service of notice, etc.

Such Termination is initiated by a Letter of Notice. When any party wants to dissolve a consultancy agreement, they have to issue a letter of notice to the other party for any such termination. Legal notice for termination of consultancy agreement is a notification by one party to another informing them stating the reasons for such termination of the agreement initiated by the party. It is very important for a party to serve a notice of termination of the agreement to another party, as, through such notice, one party informs another party that they were unable to meet the terms of the contract. Sending notice is the initial step in the termination of an agreement between two parties. The termination clause of any agreement/contract contains the appropriate facts about the number of notices that must be sent by the parties and how the remunerations will be handled. The termination might also state that if one party fails to fulfill its duties in a rightful manner according to the guidelines stated in the contract so the other party can terminate the contract without any prior notice about such termination to the other party. If any party was happy with the services provided by the other party but doesn’t need their services any longer so the other party must be informed of the same. Legal notice must follow the following guidelines:

1. The notice must be formal and polite. In other words, the notice must be in a professional tone;

2. The notice must not disrespect the other party no matter how disappointing or unsatisfactory their performance/work was;

3. Ambiguity in language should be discouraged and hence avoided;

4. The party who is breaching the terms of the contract should be addressed with respect;

5. The clear reason for termination should be stated;

6. The notice should contain the point content;

7. Preferable the notice should be on a lawyer’s letterhead;

8. The party sending the address should always be clear about to whom the letter is being sent;

9. The language in the notice should be such which is understood by both the parties, i.e. is the common language of the parties should be used in the notice;

10. The notice should be served to the party within the appropriate time and other parties are given an appropriate time to respond to the notice.

The notice must contain the appropriate content for meeting all the legal formalities. The contents of the notice must have:

1. Name, Description, and Address of The Party-

The notice must contain the proper name, description, and address of the party for whom the notice is meant for.

2. Date of Receipt-

A legal notice is necessary for keeping an official record of the official date on which the notice was served and the date on which it was received. These dates play a very important role in case any dispute arises and the situation is taken to the courts.

3. The Clause of Notice Mentioned in The Consultancy Agreement-

Most agreements contain a notice clause describing how the legal notice for breach of any terms and conditions of the Agreement is to be conveyed to the party responsible for such breach (Breaching party). The notice clause consists of the contact information of the parties and mentions the method of communicating the legal notice. If any procedure mentioned in the notice clause is not followed then the notice stands on the grounds of being an invalid legal notice.

4. Reason for Termination-

The legal notice must contain specific clauses of the consultancy agreement which have been breached by any of the party. It is very important to mentioned the clauses breached by the parties so as to make a legal notice stand on strong grounds. When there is more than one breach, then every clause breached should be mentioned in the notice. If the reason of the termination of the consultancy contract is not any breach but some other reason, then all such reasons should be stated in the notice.

5. Other crucial points-

• Signatures of the lawyer

• Details of all previous correspondences

• Relief sought

• Reasonable time to reply/ respond

• The lawyer should retain a copy of such notice with himself/ herself.

All the matters related to contracts are governed by the Indian Contract Act, 1872. The act also provides for the remedies in case of breach of contract and sets up guidelines on how all the contracts are to be made and followed and what is the procedure and punishment in case of any disputes arising in courts in the context of a contract between two or more parties.

BY-

GAURAV GUPTA