Restoring balance in business management: how to properly terminate a service agreement?

Legislation

The rules governing this procedure are almost completely listed in the articles of the Law on the Protection of Consumer Rights and the Civil Code of the Russian Federation.

STD:

Art. 28 defines the procedure and options for the customer’s actions in case of significant violations of the concluded agreement by the contractor.
Art. 32 reserves the right of the guarantor to refuse to fulfill the clauses of the contract with payment to the opposing party of losses associated with the implementation of activities under the terms of the obligations.

Civil Code of the Russian Federation:

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Art. 450 contains restructuring and termination provisions.
Art. 451 provides the right to terminate a contract due to a significant change in the situation in which the parties do not receive the expected commercial benefit from compliance with the terms of the agreement.
Art. 782 imposes the right to unilateral refusal.

Is it possible to refuse

The subject of the contract is any type of activity that implies an intangible form of the intended actions.

Options for the functions of the contractor in providing paid services include:

ensuring information and communication activities;
medical service;
veterinary medicine;
provision of legal assistance;
audit service;
ensuring the educational process;
tourism business services.

The list cannot be considered exhaustive.

Refusal to further perform obligations is permitted under any contract in all areas. To terminate an agreement unilaterally, sufficient grounds are required as provided for by current legislation.

Even at the stage of concluding a contract for the provision of services, it would not be superfluous to include in the text of the document the circumstances that may result in the termination of the relevant obligations. If the required clause is not contained in the original document, the terms can be agreed among the interested parties as part of a supplementary agreement.

Important! The law provides the right to unilaterally refuse to fulfill obligations without giving reasons.

How to return the advance upon termination of the contract?

If the contractor received funds from the consumer in the form of an advance, and later the customer refused his services, then the supplier must return the money to the client. It should be noted that a situation is possible when the supplier incurred certain losses while fulfilling its obligations. In the presented case, the indicated losses are deducted from the advance payment, and the remaining amount of money is returned to the client.

When terminating a contract for the provision of services, the customer has the right to demand that the contractor return the deposit, if such a possibility is provided for in the agreement. Otherwise, it will be possible to return the advance funds only in court.

Conditions for termination of the service agreement

There must be conditions and/or grounds provided by law.

Grounds and reasons

Civil law establishes three legally significant circumstances for terminating a contract:

The possibility of termination and its procedure are included in the clauses of the relevant legal act.
Significant breach by one of the parties of the provisions of a valid contract.
Changes in circumstances directly affecting the need to implement previously established obligations.

The reasons for refusing to further fulfill the contract must be strictly motivated. Among them, the law identifies the following:

Service completion deadlines were not met. It becomes clear that, in general, the order will not be completed on time within the established intervals.
The guarantor's payment schedule is violated.
The quality of the work provided causes persistent complaints from the customer. The contractor ignores requests to eliminate deficiencies.
It becomes obvious that upon completion of the work, the work will not meet the quality specified in the terms of the contract.
Allowance by the counterparty of significant work defects that cannot be corrected.

Differences between early and unilateral refusal of execution

In the first case, the initiator needs to notify the other party under the current agreement, and then compensate for the losses incurred by it. A warning of intention to terminate legal relations is issued in the form of a letter. It is drawn up on paper and sent by mail or electronically online to the address of the counterparty. When liquidating mutual obligations in this case, the following conditions must be observed:

Pay the contractor the amount of damage suffered by the customer in connection with the cancellation of the legal relationship.
Compensation of damages by the guarantor to the opposing party for expenses incurred during the validity of the agreement is obligatory.

Know! Mutual obligations terminate at the moment of notification of the intentions of the initiator of the other party to the legal relationship. The law does not force you to give reasons for your decision.

Unilateral refusal to fulfill obligations under the clauses of the current agreement is associated with a number of difficulties provided for this type of legal decision:

When contractual obligations are terminated at the initiative of one of the parties, the conflict is regulated in court.
In this case, the refusal will inevitably have to be strictly and sufficiently motivated for the dispute to be considered in court.
The agreement is revoked from the moment the relevant verdict is issued.

The difference between the two options lies in the amount of costs, termination time and associated complexities. The first method is preferable.

Unilateral termination

A characteristic feature of a service agreement is the ability of one of the parties to initiate the process of terminating the presented contract, both in the presence of legal grounds and in their absence. In the latter case, we are talking about a unilateral refusal to fulfill one’s obligations for an unmotivated reason. Termination of the designated transaction due to non-compliance with the initial terms of the previously concluded contract entails the need to pay losses to the injured party.

Grounds for termination of a service agreement:

If the contractor did not fulfill his obligations in a timely manner, which are indicated at the conclusion of the document. The presented rule is indicated in the second paragraph of the article under number 715 of the Civil Code of the Russian Federation;
The services provided by the other party to the legal relationship are of inadequate quality. This basis is indicated in the third paragraph of the article under number 715 of the Civil Code of the Russian Federation;
If the contractor ignores the customer’s requirements to eliminate deficiencies. This requirement is indicated in the third paragraph of the article under number 723 of the Civil Code of the Russian Federation.

In all of the above cases, the initiator of termination of the service agreement is required to provide documents that can prove the basis for termination of further cooperation. In the absence of evidence, termination of the agreement in this situation is impossible. However, it should be noted that there is the possibility of unmotivated cancellation of a service agreement unilaterally. It is also required to indicate that if the customer wishes to initiate the procedure for terminating the contract for the provision of services while the contractor is fulfilling his obligations, he must pay him for the work performed.

Sample notification

The participant in the contractual relationship who initiates the termination of the agreement must notify the other party to the transaction about this. This is done by drawing up a written notice, which indicates the desire to terminate further cooperation.

The provisions of the legislative acts of the Russian Federation do not contain a standard form for the specified notice. In accordance with the indicated information, a notice of termination of the service agreement is drawn up in free form. However, despite this, when preparing the submitted document, it is recommended to adhere to a business style of presentation of information.

The notice of termination of the service agreement must contain the following information:

Name, legal and actual address, as well as contact telephone number of the executing organization;
Last name, first name and patronymic and contact information of the consumer;
The full name of the document is “Notice of unilateral termination of the service agreement”;
The content of the notice must indicate the reason on which the cooperation between the contractor and the customer is terminated;
Designation of the requirements of the initiator of termination of the contract for the provision of services or obligations, according to which the defendant must return a certain amount of money to the applicant;
The date upon which the contract becomes invalid;
At the end, the date of drawing up the notice of termination of the contract is indicated, and the applicant’s signature is also affixed.

Notice of termination of the contract concluded between the contractor and the customer for the provision of services must be sent to the defendant before the moment when the initiator of the cancellation of the contract files a statement of claim with the court. A notice of termination of further cooperation is sent to the legal address of the participant in the transaction, who is the defendant in the case. It is recommended to provide the submitted documents to the other party to the legal relationship using postal services, namely by registered mail.

How to terminate correctly

The legislation gives each party a direct opportunity to terminate the agreement upon compensation to the counterparty for losses associated with the action.

The right given by law does not allow for variations in interpretation; this is also true for offer contracts. It is important to compensate for the costs that may be incurred by the other party.

To terminate the service agreement, you must:

Notify the counterparty in writing of your intention to terminate the existing contract.
The reaction can occur within thirty days.
If a refusal is received, initiate resolution of the conflict in court.
Without waiting for the deadline for receiving a response message, file a claim for termination of the contract in court.

Remember! The concepts of unilateral refusal to fulfill obligations under an agreement and unilateral termination of an agreement have significant differences, and they should not be confused, much less considered identical.

A reasoned decision to terminate the legally formalized relationship of the parties is associated with the consideration of the dispute by an arbitration authority. The desire of the initiator to be freed from further performance of certain obligations must be supported by an evidence base containing information about significant violations of the contract by the second party. It is important to correctly state the grounds for the decision in the claim document.

An unmotivated refusal to further fulfill the provisions of a pre-registered relationship only implies payment for losses incurred by the other party due to terminated cooperation.

To the customer on his own initiative

Objective circumstances of a company or individual for early termination:

the need for the work provided by the contractor has disappeared;
one of the parties to the dispute repurposed its activities;
force majeure circumstances independent of the counterparties have arisen;
the fulfillment of the duties of one of the parties occurs with significant legal or factual violations.

It is easier for the customer to initiate the process of termination of actions under the contract. After all, in most situations the executor does not bear significant costs associated with the implementation of activities to secure obligations.

As practice shows, legal norms are also on the customer’s side. The severance of relations in this area is provided for by the Civil Code of the Russian Federation:

Art. 450. General provisions relating to the loss of contractual obligations are listed.
Art. 782. The right of the parties to an early unmotivated decision to refuse further performance of the contract is secured.

Know! As a general rule, the effect of special rules prevails over general legal considerations.

If the need arises to sever legal relations, the customer has the right to:

send a corresponding letter to the performer;
compensate him for his losses.

The date of release from obligations is considered to be the time of receipt of the notification by the counterparty.

To the performer

Also has the right to terminate the legal agreement early. Algorithm for this side:

notify the counterparty in writing;
compensate him for all possible losses associated with the circumstance that arose.

The date of legal termination of the relationship is considered to be the time of receipt of the notification.

If the conflict cannot be resolved peacefully, the party whose rights have been infringed goes to court with a statement of claim. The guilty participant is charged a fine, penalty, amount of the penalty, and other money based on calculations of the damage caused to the applicant by the activities of the counterparty.

Drawing up an application

on how competently the application for termination of the service contract, as well as other documents, is drawn up. The application is made in two cases:

If the customer refuses the company's services.
When filing a claim in court.

In both cases you need to follow the same algorithm .

Open the text of the service agreement and carefully read its contents in a new context .

Pay attention to the quality of services that were positioned to be provided.

What is stated in the clauses of the contract? If it does not contain a specified clause (subclause) about what you planned to present as the reason for terminating the contract, you should not rely on it.

For example, when drawing up the contract, you did not provide for the possibility of replacing an employee and did not reflect your requirements in any way. This means that this point will not be accepted either by the service provider or by the court.

See other options that are reflected in the clauses (subclauses) as a condition of interaction, but were not fulfilled by the company. If you find the prescribed competencies of an employee who in fact does not meet them, great. We will continue to act in this direction.

The contract can be unilaterally terminated only on the basis of unfulfilled clauses . To do this, make a written statement indicating the reasons for your dissatisfaction with the company’s work, with reference to the specific terms of the contract that it did not fulfill. Warn that if the situation is not corrected immediately, in a month you will terminate the contract unilaterally.

Form (form) of an application for termination of a contract for the provision of paid services.

Arbitrage practice

It is necessary to follow the procedure for pre-trial dispute resolution. In this regard, the initiator is obliged to formally contact the counterparty - notify him of his intentions, inform him of the date of termination of the provisions on interaction and undertake to compensate the opposing party for losses.

The legal field does not contain an established sample letter with a unilateral decision to terminate existing obligations. The document is drawn up in a free style, but it would be useful to follow the rules of business correspondence indicating the following data:

name of the counterparty company, its address;
title of the letter: the appeal is related to the decision of one of the parties to refuse further performance of duties or with the intention to terminate the current document;
information about the date and place of the notification;
contract number and date of its conclusion;
justification for the need to terminate the agreement (in case of refusal, this is not required);
a provision of civil law that allows the decision to be implemented in the legal field;
obligation to compensate for losses of the other party caused by early termination of the relationship;
the time from which mutual agreements should be considered completed.

The situation could escalate. The interested party may object to the termination of the contract. Then the conflict that has arisen seems possible to resolve only during the judicial consideration of the case. To do this, you should submit a statement of claim, indicating:

name and address of the court to which the appeal is sent;
applicant details;
the reasons that led to the need to terminate the established legal relationship between the participants;
the right to collect from the guilty party a penalty, a fine, a penalty, an advance payment and a penalty for the advance payment itself;
requirement to compensate legal costs, including state fees, at the expense of the defendant;
date, signature of the applicant.

The claim should be accompanied by a copy of the defendant’s notice of termination of the contract, a calculation of the penalty, which the guilty party must compensate together with penalties, possible fines, and advance payments.

The applicant has the right to directly participate in the hearings, following which he receives a copy of the court decision.

Example.

The court received an appeal from a law firm with a claim to collect a penalty in the amount of 200,000 rubles from the agricultural cooperative. The terms of payment were expressly stated in the contract for legal services of the customer. The amount according to the provision of the contract was to be recovered from the counterparty in the event of unilateral refusal of further cooperation. The customer refused it. The court satisfied the lawyers' demands; two cassation appeals of the cooperative left the verdict of the trial court unchanged. At the same time, the Supreme Arbitration Court annulled the decision, citing the provisions of Article 782 of the Civil Code of the Russian Federation, according to which the parties have a mandatory right to unilaterally terminate the contract for the provision of services for a fee. Consequently, all other conditions take on negligible significance, their effect is limited by the special function of Article 782.

Attention! By using the services of knowledgeable lawyers, you can significantly reduce the time and money spent searching for the necessary solution to the issue.

Consequences

Breaking a contract entails not only legal, but also property consequences for the guilty party. A properly filed claim allows the plaintiff to obtain from the defendant full compensation for damages, penalties, fines, penalties and other payments, including moral damages due to the defendant’s dishonest performance of obligations.

Not only failure to meet service deadlines, but also their inadequate quality are subject to sanctions. Negligent attitude towards the provisions of the contract on the part of the customer also does not go unpunished. A fine is imposed on the guarantor for late payment for the service provided or complete failure to pay for the actions performed in the amount determined by the provisions of the document on the legal relations of the parties.