How to cancel a business to business contract

Written by maggie gebremichael
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How to cancel a business to business contract
Torn contract (Medioimages/Photodisc/Photodisc/Getty Images)

Most contracts among businesses when properly entered into are legally binding. In some cases, buyers submit purchase orders or requests for goods or services, but the sellers' confirmation serves as the business contract. When businesses regularly deal with each other, past actions can influence contract cancellation procedures. For instance, if A&B Store repeatedly has allowed C&D Market to withdraw purchase orders five days before delivery, A&B suddenly cannot change its policy.

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  1. 1

    Contact the other party to describe the situation and request a cancellation. Since many business owners want to develop long-term relationships, owners might be willing to cancel a contract for free or for a nominal fee.

  2. 2

    Analyse any written business contract to determine if applicable clauses or provisions exist. Even though oral agreements can be binding, always strive to record written contracts so that you have evidence of the contract terms.

  3. 3

    Initiate steps based on the contract terms. For instance, the contract might state that you must notify the other party using certified mail within one week of signing the contract. If you fail to comply, the other party might file a lawsuit against you based on breach of contract.

  4. 4

    Review state laws about rights to cancel contracts and cooling off periods, which vary by state. Your state's attorney general office or a licensed attorney can inform you about the laws.

  5. 5

    Violate the contract by not performing or paying, though you will be subject to litigation and your business reputation will be impacted. For instance, if your company hired a contractor to expand a building, the contractor can file a lien against company assets when you fail to pay or cancel right before the work is completed.

Tips and warnings

  • Offer to find another company that can provide similar quality products or services, especially when the contract involves limited resources.
  • Consult with an attorney before acting or breaking the contract. You might have a legal way to get out of the contract, such as based on misrepresentation or unconscionable provisions.

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