Why do you need a termination agreement? How to compose it correctly? What are the consequences of entering into an agreement? Download sample agreements for various situations, see recommendations for drafting, and ask questions to a lawyer.
|
When can a termination agreement be concluded?
A termination agreement is signed by the parties when they have mutually agreed to terminate the existing business relationship. The reasons for this may be:
- The partners or one of them have lost interest in continuing cooperation. For example, contracts were concluded on more favorable terms with another supplier.
- Failure to comply with the obligations of one of the parties. In this case, there is mutual agreement when the partners understand that violation of the deadline for the provision of services makes their cooperation impossible, and they reach a consensus without involving the courts.
- The occurrence of such circumstances when there is no point in continuing cooperation. For example, termination of a contract for maintenance of a building when it is demolished.
Of course, these are only a few examples of cases where the parties agree to terminate contracts. It is important to remember that termination is possible only under existing contracts, and not those that were terminated earlier on other grounds, for example, due to proper performance.
Example of a termination agreement
As a rule, an agreement to terminate (change) a contract is drawn up by the interested partner and signed in a number of copies equal to the number of parties to the contract. The current legislation does not provide for the form of the agreement to terminate the contract. However, in accordance with established legal practice, the document must contain the following elements:
- name: Termination Agreement
- place of compilation;
- date of signing;
- the name of the counterparties with the obligatory indication of the signatories and their powers;
- condition for termination of the contract;
- grounds for termination of the contract in cases where they are provided for by law or contract;
- date of termination of the contract (can be formulated as follows: “terminated from the moment of signing”);
- consequences of termination, for example, a guarantee of one of the parties to pay for the services provided;
- signatures and details of the parties.
In some situations, it is necessary to attach other documents to the agreement. So, when the lease agreement is terminated, you need to return the property to the lessor according to the transfer and acceptance certificate. This act will be an integral part of the termination agreement.
Termination Agreement
Labor contract
The fact of termination of an employment contract is carried out at the initiative of either party, or by mutual agreement. It is possible to draw up an agreement to terminate an employment contract by preparing a separate document.
An important nuance for creating a termination document is to come to a general compromise regarding this situation. This document must also contain the conditions for termination of the employment contract, as well as the responsibilities of both parties that are associated with its termination.
It must be taken into account that if an employee of an enterprise is pregnant, this may be grounds for reconsidering the terms of this document on termination of the employment contract. For example, in reality there was a situation in which the head of a company fired his employee due to the fact that she refused to perform her official duties due to pregnancy.
But since this type of agreement was not formalized, the court ruled that the dismissal was illegal and reinstated the woman in her position. In other words, the importance of such a document should never be underestimated.
Find out how to draw up an agreement to terminate an employment contract from the video.
https://youtu.be/SMviuYx6X8Q
Contracts
Drawing up an agreement to terminate a work contract is quite simple, and it can be fit into one incomplete sheet. At the very beginning, the name, date and number of the document that is subject to termination are written down.
Then the date of drawing up this termination agreement is written. After this, the data of the parties is written down, then the fact of termination of the agreement is stated in the body of the document, which is considered formalized after signing this agreement.
Then it is indicated that the obligations of both parties by signing the document are terminated within the framework of the previously concluded agreement. If it is necessary to pay compensation to one of the parties, this must also be reflected in the contract indicating the exact amount of payment.
Next, it is necessary to state that the agreement can be considered valid only from the moment it is actually signed by both parties; the number of copies of the agreement must be specified. After this, the details of the parties, the date and signatures of the parties are indicated, which must also be accompanied by seals.
In general, such an agreement looks almost the same as in the case of an employment contract.
Lease agreements
In order to most approximately determine the expiration date of the lease agreement or in case of urgent need for early termination of this document, both parties must jointly develop an agreement to terminate the lease agreement and then sign it.
Such an agreement will help the parties set all their own priorities on this issue in the relations between the parties in relation to the previously concluded agreement. In addition, such a document will be able to confirm the absence of claims between the parties, or strictly determine the exact amount of debt by the tenant in accordance with the rent, taking into account the specific period for the return of the leased premises in accordance with the acceptance certificate to the landlord. This type of agreement must include the following:
- date of conclusion and number of the lease agreement to be terminated;
- The date of termination of the document (at the same time this may also be the date of preparation);
- Deadline for returning the premises to the lessor in accordance with the acceptance certificate;
- Presence/absence of mutual claims.
Sample form of termination agreement
Paragraph 1 of Article 452 of the Civil Code of the Russian Federation contains the requirement that the form of termination (change) of the contract must correspond to the form of its conclusion. Therefore, a document on the termination of a transaction that has undergone state registration or notarization should also be registered or certified at a notary’s office.
It is important to remember that this requirement cannot apply to a compensation agreement, since this is an independent transaction that terminates the obligation by direct instructions of the law, and not by a termination agreement.
Failure to comply with the form of the agreement to terminate the contract in some cases leads to its invalidity, in other cases it is not concluded due to lack of proof of the wishes of the parties.
Termination of agreement/agreement/contract
ADDITIONAL TERMINATION AGREEMENT
supply agreement/compensation agreement No. 405/A dated May 22, 2016 i
| Molodechno | i Unknown |
Organizational and legal form and corporate name, represented by the full name and position of the person authorized to sign an agreement acting on the basis of the Charter (for the director of a legal entity) or power of attorney No. [] dated [DD.MM.YYYY] (for a representative of a legal entity persons) Individual entrepreneur, represented by the full name of the individual entrepreneur acting on the basis of a certificate of state registration No. certificate number dated date of issue of the certificate Vasily Ivanovich Sidorov, born in 1990, (“Seller”), on the one hand, and
Organizational and legal form and corporate name, represented by the full name and position of the person authorized to sign an agreement acting on the basis of the Charter (for the director of a legal entity) or power of attorney No. [] dated [DD.MM.YYYY] (for a representative of a legal entity persons) Individual entrepreneur, represented by the full name of the individual entrepreneur, acting on the basis of a certificate of state registration No. certificate number dated date of issue of the certificate, full name and year of birth, (“Buyer”), on the other hand,
each individually referred to as a “Party”, and together as the “Parties”,
entered into this additional agreement (hereinafter referred to as the Agreement) on the termination of Unknown No. 405/A dated May 22, 2016 (hereinafter referred to as the Agreement) as follows:
- The Parties hereby decide to terminate the Agreement by agreement of the Parties. The Agreement is considered terminated from August 22, 2016 from the moment this Agreement enters into force.
- From the moment of termination of the Agreement in accordance with clause 1 of the Agreement, the Parties do not consider themselves bound by any rights and obligations.
- The parties confirm the absence of mutual claims against each other.
- This Agreement comes into force from the moment it is signed by both Parties and is an integral part of the Agreement.
- This Agreement is drawn up in 2 (two) copies, 1 (one) for each of the Parties.
Signatures of the parties:
| Salesman | Buyer | ||
| Organizational and legal form and corporate nameIndividual entrepreneur Full name of the individual entrepreneur Full name: Full name | Organizational and legal form and corporate name Individual entrepreneur Full name of the individual entrepreneur Full name: Full name | ||
| Address: addressAddress: Minsk, st. Lenina 5, apt. 10 | Address: addressAddress: registration address | ||
| UNP: UNPassport: MP3052305 | UNP: UNPassport: series and passport number | ||
| Account number: Account number Issued by: Frunzensky District Department of Internal Affairs of Minsk dated 06/15/1985 | Account number: Account number Issued by: authority that issued the passport and date of issue | ||
| c: bank name bank code: bank code bank address: bank address Date of passport issue: 05.15.2010 | |||
| in the bank name bank code: bank code bank address: bank address Date of passport issue: 05/15/2007 | |||
| ___________ | ____________________ | ___________ | ___________________ |
| signature | full name | signature | full name |
| seal | seal | ||
Sample termination agreement
| Termination Agreement g. ________________ “___”__________ ____ g. I, _______________________________________, on the one hand, hereinafter referred to as “Party 1”, and I, _______________________________________, on the other hand, hereinafter referred to as “Party 2”, have entered into an agreement to terminate the contract:
Side 1:_________(_________________________________), Side 2: _________(_________________________________). |
Agreements on termination of certain types of contracts
Regarding the conclusion of agreements on the termination of certain types of contracts and related features, we note the following:
| Type of agreement | Comments and examples |
| Lease contract | The signing of an agreement on early termination of this type of contract and an act of return of the leased property provide grounds for the collection of rent paid previously in advance (decision of the RF Armed Forces dated November 15, 2018 No. 305-ES18-17138 in case No. A40-122306/2017). |
| Work agreement | ● sending a letter from the customer to the contractor with a signed agreement to terminate the contract is a unilateral refusal of the contract due to improper performance by the contractor of his duties (resolution of the Federal Antimonopoly Service of the Moscow Region dated July 16, 2012 in case No. A40-112517/11-69-1004); ● the moment of termination of the work contract is the date from which the period for submitting VAT for deduction is calculated (determination of the Supreme Court of the Russian Federation dated June 26, 2018 No. 308-KG18-2949 in case No. A32-1748/2017). |
| Other civil contracts | An agreement to terminate a contract may be recognized as an imaginary transaction, for example, when an agreement is concluded on the eve of the bankruptcy of a person without the actual return of the property transferred under the contract (determination of the Supreme Court of the Russian Federation of December 28, 2018 No. 303-ES18-21149 in case No. A73-19328/2017). |
| Employment contract | Concluding an agreement to terminate an employment contract is one of the grounds for terminating the employment relationship between an employee and the company. An agreement can be concluded at any time, at the initiative of any of the parties (clause 1, part 1, article 77, article 78 of the Labor Code of the Russian Federation). |
Possible consequences of signing a termination agreement
Civil legislation provides that, according to the general rule, termination of a contract leads to the termination of the obligations of counterparties (clause 2 of Article 453 of the Civil Code of the Russian Federation). However, when signing an agreement to terminate the contract, you must remember the possible occurrence of the following consequences:
- Damages may be recovered from the at-fault partner. Thus, the courts recognized the right to recover real damage from the debtor, which was expressed in the difference between the actual cost of the work and the transferred advance payment.
- Recovery of illegal enrichment if more is transferred to a partner than received from him.
- Preservation of the terms of the contract, the nature of which provides for their application even after termination of the contract itself. An example may be the preservation of the contractor’s warranty obligations for contractual jurisdiction or work performed.
Therefore, termination of the relationship between the parties can be accomplished by signing a termination agreement containing all the details mentioned above. If such a termination instrument is used, partners need to ensure strict adherence to the form of the agreement. You should also remember the consequences that may well occur when signing such a document.
Features of the agreement to amend the contract
An agreement to amend a specific contract has well-defined boundaries. In this case, it is allowed to change only the specific terms of the contract, but not the type (or type) of the contractual obligation. For example, if under an exchange agreement, as a result of the agreement of the parties, the item that must be transferred instead of the property received by the counterparty, or the method of fulfilling this obligation, changes (instead of shipment by rail, pickup is offered), then there is an agreement to change the agreement. If the parties provide for the obligation of the counterparty who received the property to pay a certain monetary equivalent for it, then a transition is already made to another type of obligation - purchase and sale, which is an agreement to renew the obligation arising from the exchange agreement (Article 414 of the Civil Code).
Legislation or a specific agreement in relation to certain types of contracts may provide for both the fundamental impossibility of terminating or changing the contract, as well as special grounds, consequences and procedures for changing or terminating the contract. Examples of such norms include the provision of the Civil Code on the inadmissibility of making changes to the terms of a state loan agreement (clause 4 of Article 817). Under an agreement for the sale of enterprises, the rules established by the Civil Code on the termination or amendment of a purchase and sale agreement, which provide for the return or recovery in kind of everything received under the agreement from one or both parties, are applied if such consequences do not violate the rights and legally protected interests of creditors both parties, other persons and do not conflict with public interests.
A special case of changing contracts by agreement of the parties is a settlement agreement, which is concluded between the debtor (arbitration manager) and his creditors in the event of insolvency (bankruptcy) of the debtor. According to the Federal Law “On Insolvency (Bankruptcy)”, the decision to conclude a settlement agreement on behalf of bankruptcy creditors is made by a meeting of creditors by a majority of their votes. The settlement agreement comes into force from the moment it is approved by the arbitration court. It may contain conditions:
- on installment plans or deferment of fulfillment of the debtor’s obligations;
- on the assignment of rights of claim of the debtor;
- on the fulfillment of the debtor’s obligations by third parties;
- about a discount on debt;
- on the exchange of claims for shares;
- on satisfying creditors' claims in other ways that do not contradict current legislation.
In accordance with the general rule, it is impossible to terminate a settlement agreement that was approved by an arbitration court by an agreement between the debtor and individual creditors.
Termination of a transaction as a result of the signing of an additional agreement to amend the contract or to terminate the contract cannot cancel obligations that, by their content and essence, must be fulfilled after its completion - for example, warranty obligations in relation to the completed part of the work.
Termination of the contract by agreement of the parties
Analyzing legal practice, we can highlight the following typical cases of termination of a contract by mutual consent:
- One of the parties no longer needed further cooperation. This may be due to the achievement of a specific goal or, conversely, the belief that it is impossible to achieve it.
- Circumstances have arisen when further cooperation does not make sense (flooding of the territory, demolition of a building, adoption of a prohibiting law, etc.).
- One of the partners cannot fulfill their obligations on time and, without waiting for negative consequences, proposes to terminate the contract.
What the law says
Freedom of contract is enshrined in the Civil Code (Article 1, 421) and can be limited by an assumed obligation or special legislative acts.
The freedom of a contract implies not only the exclusion of coercion during its conclusion, the legality of the choice of form (Civil Code Art. 434), partners, designation of guarantees (Civil Code Ch. 23), but also the admissibility of making changes up to the termination of its validity.
Termination of a contract should not be confused with unilateral refusal of contractual obligations (Civil Code Art. 450.1, 310). They are different in essence, consequences, and method of implementation. Cancellation of a contract is the same transaction as an agreement, and therefore is carried out upon reaching mutual agreement, which is secured by the acceptance and signing of the relevant agreement.
A unilateral refusal cannot be a transaction (the obvious absence of a second party), and therefore is implemented only through the court in certain specified cases and if there are grounds (Federal Law No. 44, Article 95, paragraphs 8, 9, 15). These grounds must be formulated and specified in the body of the main agreement.
The veto on the return of partially fulfilled obligations under the contract (Civil Code Art. 453, paragraph 4) can be circumvented by filing claims for unjust enrichment (Civil Code Art. 1102, 1103).
The other party’s request for repayment of the debt incurred at the time of refusal of the counterparty’s obligations is also considered quite justified (Letters of the Presidium of the Supreme Arbitration Court No. 104 2005/21/12 clause 1 and No. 147 2011/13/09 clause 7).
Termination (change) of an existing contract is the consent of the parties, which is reflected in a written agreement, the formation of which goes through the same stages as the original agreement (Civil Code art. 432 clause 2, 434, 452 clause 1):
An appeal to the court must be preceded by a failed attempt to settle the case out of court (refusal or silence of the transaction partner).
It should be borne in mind that the ability to terminate a contract on the initiative of one partner with the obvious disagreement of the other does not at all mean that the court must issue an approving conclusion. An announcement of suspension of duties is void in nature without a court decision and does not lead to automatic termination of the contract.
The contractually established rights and obligations of the parties to a transaction can only be canceled by a 2-party agreement or a court order (Civil Code Chapter 29).
The moment of termination of the contract is considered to be the moment of signing the agreement to terminate the contract or the entry into force of the court document.
Legal regulation
There are many reasons for terminating a contract. In any case, the parties have the legal right to take the initiative to terminate cooperation.
Termination of a contract becomes especially relevant when, for objective reasons, further cooperation is impossible. This is also true if one of the counterparties cannot fulfill its obligations in a timely manner and decides to immediately terminate the contract.
The last reason is the most common and most often results in litigation, since it implies payment of compensation to the other party, even if this is not contained in the agreement.
The procedure for terminating the contract and its possible consequences are regulated by the Civil Code of the Russian Federation in Chapter. 29 “Change and termination of the contract.”
This is also important to know:
Termination of a lease agreement: form of agreement to terminate the contract
In Art. 450 of the Civil Code of the Russian Federation spells out the grounds for amending and terminating a contract, according to which the contract can be terminated only with mutual consent of the parties.
Another basis for termination is the person’s failure to fulfill his direct duties agreed upon earlier, or a significant violation of the terms of the contract.
In this case, the only possible way out is to go to court, where during the trial the plaintiff will have to prove which terms of the contract were violated by the defendant.
In Art. 452 of the Civil Code of the Russian Federation determines the procedure for amending and terminating the contract.
If the counterparties are ready to refuse the transaction by mutual consent and have legal grounds for this, they first discuss the terms of refusal to cooperate (see Article 434.1 of the Civil Code of the Russian Federation). This is how pre-contractual liability arises for both parties.
And lastly: in accordance with paragraph 3 of Art. 453 of the Civil Code of the Russian Federation, the moment of termination of the contract by agreement of the parties is considered to be the time of concluding the termination agreement, unless otherwise provided by law or the terms of the agreement.
Grounds for unilateral termination of a contract
According to Article 450 of the Civil Code, there are 3 legal grounds for unilateral termination of a contract for the provision of services:
- If the procedure for terminating such an agreement is determined by the agreement itself or prescribed by law. The contract must also provide for the procedure for canceling the contract for the provision of services.
- If one of the parties has materially violated this agreement. A material breach in Russian law refers to conditions that place one of the parties in a position in which it may lose everything it hoped to receive after the other party fulfills the provisions of the contract.
- If circumstances affecting the need to conclude a contract for the provision of services change significantly.
How to terminate a transaction according to Art. 450 Civil Code of the Russian Federation
Termination of a transaction by agreement of the parties is relevant only for contracts in which the validity period is established, as well as for those contracts that do not terminate with the fulfillment of obligations under them.
For open-ended contracts, the legislator provides for the possibility of unilateral refusal to perform them with notification to the other party, for example, a month in advance. The agreement between the parties indicates that both parties do not object to the severance of the relationship. If one of the parties does not express its consent, then the contract is subject to termination only through the court. At the same time, this agreement is intended to regulate certain aspects of the early termination of the transaction.
By signing an agreement, the parties can confirm that they have no mutual claims, or, conversely, indicate the fact that there is a debt under the obligation and it must be fulfilled within a certain period. In this case, one of the parties, by signing the agreement, also recognizes itself as a debtor.
