Most businesses rely on vendors to get their materials and supplies for manufacturing products or offering services. For example, a catering service may have different vendors for supplying linen, vegetables and meat and beverages. A business may decide to terminate the services of a specific vendor for several reasons. The business may be closing down or the business may want to use a new vendor for a specific item. A business may also want to terminate a vendor’s service if it is delayed, irregular or provides low quality supplies.
Even though the manager can cancel a vendor’s services in person or by phone, it is more professional and legally safer to send a vendor termination letter. A letter can clearly state in writing the terms of the contract and the terms of the cancellation.
Before taking any steps to terminate a vendor, the manager or owner of a business should carefully review the vendor contract. There may be fees or other financial penalties for cancelling the contract. Every precaution should be taken to follow any terms and conditions for terminating the contract. The vendor may have an attorney review the letter to make sure no part of the contract was breached. If this happens, the vendor may be legally able to extract fees and keep a deposit.
If the contract is automatically renewable, there may be a time-frame for cancelling. The vendor may need to be informed one to three months before the end of the contract. If this isn’t done, there could be penalty fees.
The vendor termination letter should be written on company letterhead. It should be written with a formal, polite tone and not express any anger or unhappiness even if the reason for the termination is the poor service or product of the vendor. There’s no point in upsetting the vendor with angry words, and it may become necessary to use this particular vender again in the future. It’s always recommended to end business relationships on a friendly note.
The letter should be address to the manager in charge of supplies. The first sentence should express the reason for the letter and the date of termination. The reason for terminating the contract should be stated. If there is more than one reason, they can be listed. The product or service may no longer be needed or a new vendor is required. If a new vendor is required, the letter should explain why it’s necessary to switch vendors.
It may be necessary to quote sections of the vendor contract to make it clear that the business is following the contract’s terms and conditions. If there are any outstanding invoices, it should be clearly stated when they will be paid. If the reason for terminating the contract is not because of poor business practices of the vendor, then the business manager can thank the vendor for their services and offer to give a good testimonial. The manager should welcome any questions from the vendor and give their contact information.
Here is a sample vendor termination letter. It should be written in formal business style and sent by certified mail, so the sender has proof of the time and date the letter was received. This may be required if the vendor insists the terms of the contract have been violated and consequently demands extra payment. The sender should keep a copy of the letter to have a record of the transaction.
Sample Vendor Termination Letter
Name of Sender
Name of Sender’s Company
Title of Sender
Address of Company
City, State, Zip Code
Name of Vendor Manager
Name of Vendor’s Company
Address of Vendor’s Company
City, State, Zip Code
Dear Name of Manager,
I’m writing this letter to formally inform you that the contract Name of Company has with you to supply 10 cases of bottled water per week will expire on DATE. We will not renew the contract. According to the contract, we may cancel at any time before the expiration of the contract.
Our company no longer requires bottled drinking water because we have invested in a water filter and can provide pure drinking water to our customers at lower cost. We will accept the regular shipment until the expiration date. You can send the last invoice as usual at the end of the current month, and we will pay it immediately.
I would like to express gratitude on behalf of Name of Company for the prompt and satisfactory service you have given over the past five years we have been receiving bottled water from you. I would be happy to personally give a positive testimonial to your good service and product.
If you have any questions, please call me at 555-123-4567 or reach me at Name@email.com. We wish you all the best for your future concerns.
Signature of Sender
Printed Name of Sender
Position of Sender
By Andre Bradley