Definition
An active contract can be terminated, following the terms and circumstances set forth by both parties, before it has been fully completed. The step-by-step management of the contract termination process is called contract termination lifecycle management.
The requirement to fulfill obligations is void if a contract is canceled before the parties have done so. However, consider that contract termination must be handled cautiously to prevent lawsuits, unfulfilled commitments, and other legal ramifications.
Process of Contract Termination Lifecycle Management
Organisations need tools to identify failing contracts and to create a process for writing contracts that includes dynamic clause libraries and templates for legal notice of termination. Additionally, you must take action to set up a more complex contract termination procedure that offers valuable information for future improvements. Here is a three-step approach to simplify the contract termination lifecycle management in response.
Step 1: Find contracts with missing performance goals. Organisations can keep track of missed delivery and payment milestones depending on when a counterparty was supposed to have paid or delivered a product by a contract’s terms and conditions. Using a reliable contract management solution that enables businesses to set up automated contract workflow updates for users if payments and deliverables are not received by the deadline might improve this procedure.
Step 2: Write a Letter Terminating the Contract Companies can use termination templates from their contract management system’s template library. For instance, they can use placeholders for contract data fields to add important details to a contract termination letter. A dynamic clause library can let businesses include legal clauses (such as those outlining early termination penalties) as needed. This procedure is made even more straightforward and efficient by emailing a contract termination letter to external users as a templated email from within a software system. As a result, businesses won’t waste time fulfilling duties under contracts that could cost them money, damage their reputation, or demand their attention.
Step 3: Promote Financials Tracking and Appropriate Contract Closeout Solutions for contract management can help businesses facilitate efficient contract closeout while producing valuable data to support the viability of future contracts at contract termination. Contract managers can use financial monitoring tools to maintain track of previous transactions.
Organisations can also compare a contract’s budgeted amount to its actual cost, available budget, and percentage of budget usage. Contract managers can also export these financial figures to a spreadsheet for additional computation and analysis.
