How do I terminate a work contract?

Quick summary

• A work contract can be terminated early mainly by agreement or withdrawal.
• The withdrawal must have a genuine legal or contractual reason.
• Upon termination, the price, deposits and work in progress must be settled.
• A wrong procedure often leads to another dispute over money or defects in the work.

Do you need to terminate a work contract safely and without unnecessary risk of litigation? We will review the contract, assess your specific case and suggest the right course of action.

The agreement of the parties

The Civil Code defines a work contract. A signed contract cannot be terminated unilaterally at will. Such a procedure is only possible if the contract itself or the law allows it. In the case of a works contract, the Civil Code provides for unilateral termination in certain cases, most often by way of withdrawal from the contract. This may be the case, for example, when the other party seriously breaches its obligations. In addition, the client may also withdraw from the contract before the completion of the work in cases provided for by law.

The parties can also always agree on an early termination of the work contract. The agreement should be concluded in writing to avoid any future disagreements or ambiguities. It should specify the date of termination and should also provide for the settlement of the activities already carried out.

Withdrawal from the works contract

In most cases, the works contract will not allow for termination, but it can be unilaterally terminated by withdrawal. If one of the parties breaches the agreed obligations, the contract may be terminated if the legal conditions are met. The conditions under which this is possible should be regulated by the work contract itself. It should specify what breaches of the contract may lead to withdrawal by one of the parties. If it does not contain such conditions, it is necessary to assess whether the grounds provided for in the new Civil Code have been met.

Such grounds include, in particular, so-called material breaches of contract, which may be, for example, unpaid invoices or failure to meet agreed payment terms. If the deadline for payment was agreed in the work contract, it must be complied with even without an invoice being issued. The customer will be able to withdraw from the work contract due to a breach of the work contract, for example, if the completion date agreed in the contract is not met. However, the withdrawal from the contract must be made without undue delay. If you delay, this may no longer be justified.

Another reason for the contractor to withdraw from the work contract is, for example, the failure of the customer to provide the necessary cooperation. On the other hand, the customer will be able to withdraw from the contract if the work is fundamentally defective. In each individual case, the justification for such a step must always be properly assessed. For this reason , we do not recommend using any model works contract or withdrawal template that can be found for download on the internet as it may not be relevant to your case and the withdrawal could be invalid.

How to withdraw from a work contract

It is not enough that there is a legal or contractual reason for withdrawal. The withdrawal should be clearly worded and make it clear who is withdrawing, from which contract, for what reason and when the contractual relationship is to be terminated. Equally important is demonstrable delivery to the other party. In a dispute, it is often not only whether the reason for the withdrawal actually existed, but also whether the withdrawal was clearly, definitely and properly served.

What to do if the other party does not recognise the termination

In practice, it is not uncommon for the other party to disagree with the termination. For example, they may argue that there was no reason for the termination, that the breach of contract was not serious enough or that the termination was not properly served. In such a situation, it is important to retain all communications, contract documentation, notices to cure and proof of service. If the dispute cannot be resolved by agreement, it may be necessary to pursue the matter through the courts, not only with respect to the termination itself, but also with respect to the price, defects in the work or the return of deposits.

Example from our law practice

Mrs Černá ordered a bathroom renovation, but the contractor repeatedly failed to meet deadlines and the work carried out was also defective. When the client announced that she wanted to terminate the contract, the other party argued that there was no reason for cancellation and that she was entitled to the full price of the work.

We first reviewed the contract, the communication to date and the photographic documentation of the defects. We then drafted a legally accurate withdrawal agreement, a settlement demand letter, and secured supporting documentation to prove defective and incomplete performance. In a follow-up communication, we rejected the contractor’s unjustified financial claims on behalf of the client and set the terms of settlement for the work already performed.

The result was an out-of-court settlement of the dispute and a financial settlement in favour of the client without the need for lengthy court proceedings. Our experience shows that the most frequent problems arise precisely because of vaguely written withdrawal, missing evidence of defects or delayed response to breach of contract.

Invalid work contract

If a works contract does not meet the requirements of the law, it could be found invalid. In most cases, however, it will be necessary for the contracting party to plead invalidity. This is because if neither party objects, the contract will be seen as valid and will have to be followed.

If you wish to challenge a works contract on the grounds that it is void, you will always need to consider what type of void it is and what the legal consequences are. In many cases, the party concerned must challenge the invalidity against the other party; if the latter does not agree, the court will finally assess the validity of the contract.

If you wish to terminate the work contract early, we will assess your case in a legal consultation. This is the only way to make sure that the contract is terminated correctly.

What happens after termination of the work contract

However, the termination of a works contract is not usually the end of the matter. It is also necessary to resolve how the work already carried out, deposits paid, materials supplied or documentation handed over will be settled between the parties. In practice, it is often particularly important to assess whether the part of the work that has already been carried out can be taken over and used, whether there is a claim for payment of part of the price and whether any reimbursement or financial compensation will be necessary. The question of settlement is one of the most frequent reasons for further disputes after the termination of the contract.

Summary

In practice, terminating a works contract is often more complicated than it first appears. It is not enough to simply state that you do not want to continue. The key issue is whether there is an agreement between the parties or a legal or contractual reason for termination. Equally important is how the termination is worded and whether it was properly served on the other party.

A large number of disputes arise not just over the end of the contract itself, but mainly over what follows it. The parties often discuss whether part of the price should be paid, who will bear the costs of defects, what happens to deposits, materials or work in progress. That is why it is advisable to think not only about the reason for termination but also about the subsequent settlement.

If you are not sure whether you can withdraw from the contract or how to properly draft the termination and protect yourself in case of a dispute, it is worthwhile to have the situation assessed individually. In the case of a works contract, even a minor mistake in the procedure can result in an invalid withdrawal or an unnecessary dispute for tens or hundreds of thousands of crowns.