Terminating a commercial contract is risky business. Walk away at the wrong time, and you’re staring down a breach of contract lawsuit. Walk away at the right time, and you’ve just protected your business from a relationship that was going nowhere good.
The difference? Understanding what your contract actually says and whether the other party’s conduct gives you legal grounds to end things.
Read Your Contract’s Termination Provisions First
A Chicago commercial litigation lawyer will always tell clients to start with the contract itself. Sounds obvious, but you’d be surprised how many people don’t do this before they make a move. Many commercial agreements include specific termination provisions that spell out exactly when and how you can exit.
Some contracts allow termination for convenience with advance notice. Others? Only for cause. A few have automatic termination triggers tied to specific events like bankruptcy, loss of licensing, or failure to maintain insurance. If your contract has a termination for convenience clause, you’re in good shape. These provisions typically require written notice within a specified timeframe, often 30 to 90 days. You need to follow the notice requirements precisely. Send the termination letter to the right person at the right address using the delivery method the contract specifies. Miss these details and you might accidentally breach the contract yourself.
Termination for cause provisions work differently. They require you to prove the other party breached the agreement in a way that justifies ending the relationship. Sometimes the contract lists specific breaches that permit termination. Sometimes it uses broader language about material breaches or defaults.
Understanding Material Breach
Illinois law distinguishes between material breaches and minor breaches. A material breach is substantial enough that it defeats the purpose of the contract. If a vendor delivers products three days late but you can still use them, that’s probably not material. If they deliver the wrong products entirely, and you can’t fulfill orders to your customers? That’s likely material.
Courts look at several factors:
- How much of the contract’s benefit have you lost
- Whether money damages would be adequate compensation
- How far along the other party was in performing
- Whether the breach appears intentional or negligent
- The likelihood that the breaching party will cure the problem
Why does material breach matter? It gives you the right to terminate and sue for damages. A minor breach typically doesn’t justify termination, though you can still seek damages for the harm caused.
Cure Periods And Notice Requirements
Even when a material breach occurs, you usually can’t terminate immediately. Many contracts include cure periods that give the breaching party time to fix the problem. These provisions protect both sides from hasty terminations over issues that could actually be resolved.
A typical cure provision might say something like “the non-breaching party must provide written notice of the breach and allow 15 days to cure before terminating.” If your contract has this language, you must follow it. Send a detailed notice explaining exactly what was breached and what needs to happen to fix it.
Some breaches can’t be cleanly dealt with. If confidential info or trade secrets are leaked to competitors, that can’t ever be undone. Therefore, a court will typically excuse those cure period requirements in situations where a breach is incurable after the fact.
Anticipatory Repudiation
Sometimes the other party makes it clear they won’t perform their obligations before performance is actually due. We call this anticipatory repudiation, and it can give you grounds to terminate immediately without waiting for the actual breach to occur.
But anticipatory repudiation requires clear, unequivocal words or actions showing the party won’t perform. Vague concerns don’t qualify. Minor disputes don’t cut it either. But if your contractor tells you they’re walking off the job, or your supplier says they won’t deliver the goods you ordered? That’s likely enough to justify immediate termination.
Document Everything Before You Terminate
Collect emails, text messages, delivery records, invoices, and any other documentation showing that the breach occurred. Take photos or videos if physical conditions matter. Get written statements from employees or witnesses who observed the problem.
This documentation serves two purposes. First, it helps you evaluate whether termination is legally justified. You might realize you don’t have the grounds you thought you did. Second, if the other party sues you for wrongful termination, you’ll need this evidence to defend your decision. Building your case before you act is always smarter than scrambling after you’ve already pulled the trigger.
When To Get Legal Guidance
Contract termination isn’t always straightforward. Ambiguous contract language creates risk. Disputes about whether a breach is material rarely resolve themselves. And concerns about potential litigation deserve professional attention before you make your move.
At Kravets Law Group, we help businesses evaluate their termination rights, draft effective termination notices, and defend against wrongful termination claims. Whether you’re dealing with a vendor dispute, partnership breakdown, or service provider failure, a Chicago commercial litigation lawyer can review your specific situation and help you exit the contract properly. Our team works with businesses facing difficult termination decisions and can provide the guidance you need to protect your interests. If you’re considering terminating a commercial contract, consulting an attorney before you act can save you from costly litigation down the road.