The impact of the coronavirus pandemic has encouraged many businesses to consider ending their existing contracts before they are due to expire. What are the issues to bear in mind?

Some contracts include a simple right for a party to serve notice with no reason required, usually requiring a minimum notice period.

Contracts can also be terminated for breach if a party fails its contractual obligations, either following one material breach or multiple minor breaches. In most instances, the party 'at fault' must be given an opportunity to remedy the problem before the contract can be terminated.

In addition, contracts usually provide for a right to terminate if the other party is experiencing insolvency or liquidity issues. Care is needed here following a change in law last year to protect businesses suffering in the pandemic.

Many contracts include force majeure terms which often include a termination option for parties affected by circumstances beyond their reasonable control. The wording needs to be scrutinised carefully to check whether this applies and what steps must be taken.

There may be other specific rights to terminate too, relating to late payment, confidentiality, data breaches, and more.

Getting termination wrong can be costly. If the attempt to terminate is unsuccessful, the other party may be deemed innocent and claim damages (even if they have done something wrong).

You must also ensure any notice to terminate follows the contract's procedure to avoid invalidating the attempt to end the contract.