When the law permits, when it prohibits, and what price will have to be paid?
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Your partner violates the contract—you want to terminate it immediately. Did you know that an improper termination can backfire on you?
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Did you know that even if your partner has violated the contract, unilateral termination without following the procedure is a breach of contract on your part?
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What three conditions must be met for a unilateral termination to be legal and not give rise to claims for damages?
The landlord was tired of a problematic tenant. He wasn’t paying on time, was making noise, and was violating the house rules. One day, the landlord changed the locks and informed the tenant that the lease was terminated.
The tenant filed a lawsuit. It turned out that the landlord had no right to terminate the lease unilaterally without a court order, even if there were violations. The landlord was forced to restore access to the premises and pay compensation.
The desire to act fairly turned into a legal problem. Because the law establishes not only the right to terminate a marriage but also the procedure for exercising it.
Three grounds for unilateral termination under the law
The first ground is a material breach of the contract by the other party. Article 1588 of the Civil Code states that if one party has materially breached the contract, the other has the right to terminate it. The term “material” is important here—a minor two-day delay in payment or a minor violation of the terms does not constitute a material breach. A material breach is one that deprives the injured party of what they expected from the contract.
The second reason: an indefinite-term contract. According to the Civil Code of Latvia, most contracts concluded for an indefinite term may be terminated by either party with three months’ notice, unless otherwise provided in the contract. This is not a sanction—it is a standard right of withdrawal.
Third ground: expressly provided for in the contract. The parties have the right to include specific conditions under which each party has the right to terminate the contract unilaterally. For example: if payment is overdue for more than 30 days, if confidentiality is breached, or if the procurement volume falls below the minimum level.
When unilateral termination is impossible without a court order
Residential leases and rental agreements are a special case. If the tenant or lessee does not agree to the termination, the agreement can only be terminated by a court order. Even if there are obvious violations, even if the tenant hasn’t paid for months. Changing locks, removing belongings, or disconnecting utilities without a court order is arbitrary action with all the legal consequences.
A similar approach is applied in employment contracts: termination by the employer must comply with strict procedural requirements.
Mandatory procedure for unilateral termination
Step one: Written notice of the violation. Before termination, notify the partner of the specific violation and provide a reasonable time to correct it. Exception: if the nature of the violation makes correction impossible or pointless.
Step two: wait for the deadline to correct the violation. A reasonable deadline depends on the type of violation. For financial obligations, it’s usually 7-14 days. For technical violations, it takes longer.
Step three: If the violation is not corrected, send a notice of termination of the contract. The termination date is the date the defendant receives the notice or another date specified in the notice.
Step four: Record the date and method of receiving the notice. This is key—the date of receipt determines the termination date of the contract.
Consequences of improper termination
If you terminate the contract without following the procedure or without legal grounds, you yourself become a defaulter. The partner has the right to demand: reinstatement of the contract, compensation for damages caused by the unlawful termination, and lost profits for the period since the unlawful termination.
The actual amount of the claim may significantly exceed what you were trying to protect yourself from.
What should be in the contract?
If you want to be able to terminate the contract promptly and unilaterally, include in the contract a specific list of grounds, a specific notice period (not “reasonable,” but a specific number of days), a specific notice procedure, and a provision stating that termination does not relieve the defaulter of the obligation to pay off any outstanding debt.
Three steps to take now
First, check your current contracts to see if they contain specific grounds for unilateral termination and a clear procedure.
Second: If you want to terminate the contract immediately, make sure you have a legal basis and have followed the notice procedure before sending the notice.
Third: if your partner terminates your contract, immediately assess whether the procedure was followed. If not, you have the right to compensation.
The right to terminate a contract is not a right to do whatever you want. It’s a right that only works if you know how to use it.
This article is for informational purposes only and does not constitute legal advice.