Start thinking about the termination of the agreement

An agreement can end in various ways: by performance, by termination or cancellation pursuant to the contract, via a termination agreement by mutual consent, by dissolution for breach of contract, or by annulment by the courts. Consider termination when concluding a contract—then you will be in a strong position if things go wrong.

Not every collaboration goes as planned. Those who arrange in advance how and when an agreement can end avoid being stuck or, conversely, being left empty-handed. We list the possibilities.

Termination by performance, cancellation or annulment

The simplest way for an agreement to end is through performance: both parties do what they are supposed to do — the supplier delivers, the customer pays. Note: obligations may still arise afterwards, for example if the customer discovers a defect and the supplier must rectify it.

If an agreement has an end date, this does not automatically mean the end: there is often tacit renewal unless notice is given in a timely manner. The contract will then specify termination terms, such as “give written notice at least 30 days before the end date”. A right to cancel can also be agreed upon — which is not required by law — along with the conditions and consequences, such as reimbursement of costs already incurred.

Termination by mutual consent

If there are no options for termination or cancellation, or if the conditions have not been met, the agreement remains in force in principle. The parties may then still agree to terminate the employment via a termination agreement. This is often used, for example, between employer and employee to terminate an employment relationship in an orderly manner.

Dissolution due to breach of contract

If the other party fails to fulfill its obligations, you are not required to fulfill yours in full: you may dissolve the agreement. Dissolution is more than termination — consequences that have already occurred are also reversed. However, the other party must first have had a fair opportunity to still comply; in practice, therefore, you first send a notice of default with a reasonable period.

Dissolution is also possible in the case of a so-called anticipatory breach: if it is clear that the counterparty will be unable to fulfill the agreement. This requires careful consideration. In a ruling by the Court of Appeal of 's-Hertogenbosch (ECLI:NL:GHSHE:2019:4535), a hospital had outsourced a complex ICT assignment; after exceeding critical delivery deadlines and a failed demonstration showing that the software was insufficiently stable, the hospital pulled the plug. The judge agreed to that dissolution.

Annulment by the court

Finally, an agreement can be annulled by the court, although this is exceptional. This can occur, for example, in the case of a signature under duress (violence), involving minors or persons lacking legal capacity, or in the event of error.

Frequently Asked Questions

What is the difference between termination and dissolution?

Upon termination (by performance, cancellation, or agreement), the agreement ceases for the future. In the event of dissolution due to breach of contract, furthermore, the consequences that have already occurred are reversed.

Do I always have to send a notice of default first?

Usually, yes. For dissolution due to breach of contract, the other party must in principle first be put in default and given a reasonable period of time to still perform.

Can I agree on a cancellation fee?

Yes. You can stipulate in the agreement or general terms and conditions that compensation is due in the event of early termination. This is advisable for important clients or long-term contracts.

Arrange termination properly in your contract

Attention to termination is part of the very drafting of an agreement. The legal experts at MKB Juristen ensure watertight notice, dissolution, and termination agreements. View our expertise in contract law or schedule a free intake consultation .