What is a Cancellation Contract?
Say, unfortunately, rescheduling is not an option and your clients want to cancel in full. If this happens you will need to document that decision to cancel in a signed agreement and explain what is going to happen any fees your clients have paid thus far.
This contract will be send out to your clients on its own. This is a stand alone contract that you will send all on its own to your clients. It will terminate and supersede the previous service agreementand also any oral agreements you had with the clients (say through emailing back and forth or on a phone call with them).
How to Use the Cancellation Contract and What You Should Modify Regarding Your Own Business Practices:
One thing you need to make clear within the Cancellation Contract is what is happening with any and all fees paid by your clients under the previous agreement. For example in Section 2 of the Cancellation Contract, under “Forfeit of
Many service providers have existing contract language that allows them to legally keep the retainer or at least a portion of the retainer due to services they have performed up to the date of this cancellation agreement. Look for the terms "non-refundable retainer" and "liquidated damages" in your existing contract. If you are having trouble determining whether you can legally keep the retainer payment, you should contact an attorney to go over your existing contract language.
Now, if you are giving the Client a full refund, you will want to label this clause “Refund of
For if you are giving a full refund:
“Company shall refund the full
For if you are giving a partial refund:
“All Parties have agreed that Company shall refund a portion of the fees paid by Clients at an amount of , and Clients are under no further payment obligations under the Previous Contract. Company will issue the partial refund within
What else is in this Cancellation Contract?
- I also want to quickly explain the remaining clauses in the Cancellation Contract so you’re aware of what they mean and why they are necessary:
- Company’s release of contractual obligations: This means that you, as the service provider, are no longer contractually obligated to perform on the date in the original contract
- Mutual release of claims: This is good for you and good for your clients. It says that you’ve come to an agreement with transferring all fees paid, that your clients won’t take legal action against you, and that you won’t take legal action against them for anything dealing with that previous contract and payments due or performance due on your part.
- Representations and warranties: This means that everyone has the capacity to enter into the contract, and that they are indeed the ones signing at the bottom and understanding what this document means.
- Confidentiality: This clause is important because you may be doing different things with different clients, so everyone should keep your mutual agreement to themselves.
- Venue & Jurisdiction: This clause makes sure your home county and state are the place where any dispute will be litigated and/or enforced.
- Severability: This is a catch-all clause that helps just in case one state law says that a clause in the template document is invalid then the remainder of the contract still stays intact.
- Counterparts/Facsimile Signature: This clause means that electronic signatures are okay and constitute a valid contract as if you were signing together on paper in person.
One last tidbit on adding in “Non-Disparagement” Type Language… I don’t recommend it!
People have asked me if they can include a “non-disparagement clause” or something similar in this Cancellation Contract in attempt to prevent clients from giving bad reviews online or posting anything testimonial wise about their experience working with you. First off, I don’t think putting this type of clause in your contract is a good idea because it looks bad on its face (you’re basically telling them you don’t like bad reviews and/or are worried about it) and, second, you can’t really keep your clients from writing a bad review. If you’ve done a bad job or they have something to complain about as a customer, that’s their first amendment freedom of speech right to say something. Non-disparagement clauses really only belong in business-to-business contracts, not client-to-business contracts. This is why this clause is not included in the template contract and I cannot in good conscience say it’s wise for you to add one in. Remember…. if you just SERVE SERVE SERVE and go above and beyond for your clients, you shouldn’t be worrying about bad reviews anyway. 😉
THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. EVERY SITUATION IS DIFFERENT & IS FACT-SPECIFIC. A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract.