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How to terminate the contract correctly

Have you received a defective product and want to withdraw from the purchase contract? Are you dissatisfied with the work of the craftsman and would like to terminate the contract? Or are you no longer satisfied with your insurance company’s service? The new Civil Code offers several ways to get out of contracts.

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Agreement

The first is termination by agreement. If a reasonable agreement can be reached with the other party, there is nothing to resolve. But beware! It’s good to know your rights under the contract and the law so that you don’t end up getting ripped off.

If it is not possible to reach an agreement, you can consider unilateral termination or withdrawal from the contract.

Withdrawal

When you withdraw from a contract, pretend as if it never existed. If the parties have already fulfilled their obligations under the contract, they must reimburse each other for the performance or reimburse the costs already incurred. Generally, a contract can be rescinded if it is breached in a material way, for example for unpaid invoices, or if the exact terms were agreed by the parties in the contract. However, the new Civil Code further regulates the conditions of withdrawal for specific types of contracts. For example, an exclusive licence agreement can also be withdrawn from if the assignee does not use or insufficiently uses its licence. The terms of withdrawal may also vary depending on how the contract is concluded and with whom. If it was negotiated off-premises with a consumer (end customer), typically over the internet, we can withdraw from it within 14 days without giving a reason.

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It is also possible that you have a severance payment in your contract. This means that you have to pay this amount when you cancel your contract. However, this option cannot be used in cases where one party has already provided the performance, for example, a construction company has started building a house. The severance payment is often set out in the terms and conditions, to which the contract can only refer. Many people, who often do not read the very comprehensive terms and conditions, do not even know that they will have to pay any severance pay.

Notice

If we terminate a contract, it means that it is not terminated from the start, but only for the future. This is either on the date the notice is served on the other party or on the expiry of the notice period, if one is agreed. Alternatively, the notice period is set by law, for example in the case of a notice of termination of a lease of a flat or house. Typically, we terminate contracts that commit us to some long-term performance, such as employment, tenancy, insurance or other contracts of indefinite duration.

However, termination of one contract does not necessarily extinguish our obligations to the other party under other contracts. These include, for example, contracts we have entered into in connection with a cooperation or employment agreement. By entering into a non-disclosure agreement (NDA) with an employer or a company with which we have worked, we can protect our know-how or other trade secrets even after the termination of our relationship.

If we want to terminate a contractual relationship, we must take into account a number of circumstances that will show us what options we have. Firstly, our position as a consumer or business, whether the possibility of termination or withdrawal is provided for in our contract. Also, whether the law allows it for that type of contract and under what conditions. The form of the contract, whether it is written or oral, how and where the contract was negotiated (by distance method – via the internet or in person at the business premises), whether a severance payment was agreed and in what amount, whether the contract is for a fixed or indefinite term, as they differ in the possibility of terminating the contract, and other circumstances.

Termination of a contract is not a simple operation and must be approached with great caution in order not to cause more harm than good. However, there are so many different types of contracts and possible clauses that can complicate the terms of termination that it is advisable to consult a lawyer in your particular case.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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