Cancellation Notice: Everything You Need to Know

A cancellation notice (also referred to as a notice of contract termination, contract termination letter, or notice of cancellation of contract) is a written notice of the forthcoming cancellation of a contract. In other words, it is a formal declaration from one party to another that they plan to terminate the contract.

A notice of cancellation generates a record that the canceling party has notified the other party about the cancellation. The notice contains the terms by which a party has the right to terminate the contract. It also states on what date the contract ends. This is important in case the other party claims something different later on. However, not all agreements end on poor terms. A notice of cancellation can also be used to express gratitude for services rendered and to close the contract on friendly terms in order to maintain the relationship in the future. Plus, relationships will be maintained better if terms are explicit and communication is forthcoming.

Insurance Cancellation Notices

If related to insurance, a notice of cancellation means the insurer is informing the insured party of its intent to terminate coverage, or the insured party is requesting termination from the insurer. Insurance policies mandate that insurers must provide adequate advance notice of termination or nonrenewal of an insurance policy. Typically, a period of 30 days is required to provide adequate cancellation notice. However, some states extend this requirement to 60 days. In addition, most insurance policies require the insurer to provide advance notice of nonrenewal at least 10 to 75 days prior to cancellation, depending on the circumstances and jurisdiction related to the nonrenewal.

How to Respond to a Cancellation Notice

If a customer has presented you with a notice of cancellation, do the following:

• First, listen to what the client is expressing to you. Try to understand why the client is choosing the end the agreement. If you need more information, prompt the client to provide more details by asking them to tell you more about the situation.
• Address the issue in an upfront, non-threatening way with your client or their contact person. Let the client know you care about them, want to correct the situation, and will put in a genuine effort to earn back the client's business. For example, you might say, "Kevin, I received your notice of termination, and I want you to know I am sorry to hear of your decision. If you don't mind, would you please tell me why you made this choice so my company can learn how to provide better service down the line?"
• Once you understand the reason, you can act in a way that may keep your chances of maintaining the contract alive. If price is a concern, you might say, "So if I understand you correctly, the other company offered you better pricing?" Perhaps the service was the major issue, in which case, you might say, "I hear you saying that our service has disappointed you. Would you mind telling me in what ways we've let you down?"
• If appropriate, request a chance to address the concerns the client brought up and work to improve and maintain the relationship. If the client will not give you a chance, let them know you will stay in touch. For example, you might say, "Kevin, from time to time, a client may make a decision in order to save money, and then later realize they have given up something of greater value, such as quality, service, and reliability. I will get in touch occasionally and I hope we can work together again in the future."
• Then, follow through. Send a note of gratitude to the client for past business and include any important information about the decision. Keep the client on your marketing list and perhaps in the future, they will reach out to work with you again.

Notice of Cancellation of Contract

You may want to use a notice of cancellation of contract if you want to notify a party that your current contract is being canceled and to provide an effective cancellation date. You may need to understand the terms laid out in a notice of cancellation that you've received.

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