CHINESE LAWYER .
Do you think that once you’ve signed a contract, if you don’t want to perform it anymore, you can just send a “termination notice” and be done with it?
Let me tell you, it’s not that simple.
Many people casually send termination notices, only to have the court rule that the termination was **invalid**, and on top of that, they have to bear liability for breach of contract.
Today, I’m going to explain the **core points** that courts look at when reviewing contract termination rights. There are just three steps. Listen up, and you’ll be half an expert.
(Part 1: Why your termination notice might be useless?)
First, you need to understand one fundamental thing: **You don’t have a termination right just because you think you do.**
In practice, many people panic and do all sorts of things – they send a termination notice, then file a lawsuit asking for termination, or ask to modify the contract – creating a total mess of the legal relationship.
When courts hear these cases, they normally look at two things:
Step one – Confirm the right – Do you actually have the right to terminate?
Step two – Review the procedure – Did you follow the correct process?
Both are essential. If either is missing, the termination is invalid.
Part 2: Do you have the right? – Four key questions
So how do you determine whether you have the right to terminate? A judge will ask four questions:
Question 1: Is there a termination clause in the contract?
For example, the contract says, “If payment is more than three days late, you can terminate.” But be careful – if the other party’s breach is minor, say 1 million yuan is only 2 days late, or only 10,000 yuan is missing, the court may find that the breach does not affect the purpose of the contract, and will not support your termination. This is called the “de minimis breach” rule – don’t abuse your rights.
Question 2: Has one of the legally prescribed termination events occurred?
The most common one is “the purpose of the contract cannot be achieved.” For example, you order a birthday cake, but it arrives two days late – then the purpose of the contract is defeated. But if it’s ordinary goods arriving two days late, it may not count. The key is whether the breach is serious enough to defeat what you bargained for.
Question 3: Is the person exercising the termination right the proper party?
Only the contracting parties, their legal heirs, or bankruptcy administrators have standing. A third party cannot act for you. If both parties are in breach, then both have termination rights.
Question 4: Has your termination right expired?
A termination right is like a coupon – it has a shelf life. Under the law, generally if you do not exercise it within one year from the date you knew or should have known of the grounds for termination, the right is extinguished. Also, if you send a reminder to the other party and they don’t respond, but you let a reasonable period pass, you may lose the right. And if you ask the other party to continue performing, you have effectively waived your right to terminate.
Part 3: How do you exercise the right? – Two procedural points
Once you have the right, you still have to follow the rules.
First, you must send an “effective” notice.
The notice doesn’t have to be in writing – oral, WeChat message, audio recording are all fine. But the content must **clearly state “I want to terminate the contract.” Just complaining or asking for compensation does not count as an effective termination notice. The contract is terminated when the notice reaches the other party. The other party refuses to accept it? If you used reasonable means to send it, the court may deem it “deemed delivered.”
Second, the other party can object.
After receiving the notice, if the other party believes you don’t have the right to terminate, they must object by filing a lawsuit or arbitration within the agreed or a reasonable period. Just sending a letter saying “I disagree” is not enough – they must actually go to court.
If you want to terminate a contract, first check whether you have the right(contractual, statutory, proper party, expiration), then check whether the procedure is correct(notice clear, objection properly filed).
Don’t think that sending a notice is all it takes – otherwise, you might end up being the breaching party yourself.
I’m Attorney michael from Beijing. If you’re dealing with a contract dispute and aren’t sure what to do, you can DM me, and I’ll help you figure it out.