SmartTender lawyers

Recently, our blog published an article by Yuliia Sytnyk "How to Report on the Performance or Termination of a Procurement Contract", after which we received many questions from government customers about the legal nuances of terminating the contract unilaterally. We suggest that you familiarize yourself with the answers provided by Valentyna Kruhliak – SmartTender legal adviser.

What Regulates the Procedure for Unilateral Termination of an Agreement?

If you plan to terminate the agreement unilaterally, be sure to remember that such termination is possible only if the corresponding right is established by your agreement or law. This rule is enshrined in Part 3 of Art. 651 of the Civil Code of Ukraine.

The procedure for terminating the contract unilaterally is regulated by Article 188 of the Commercial Code of Ukraine. By it, the Party to the contract, which considers it necessary to change or terminate the contract, must send a proposal to this counterparty. The counterparty must consider the proposal, and within 20 days from the date of its receipt, inform the initiator of the contract termination about the consideration results.

If the parties have not reached an agreement on termination (amendment) of the agreement or the second Party did not respond within the prescribed period, the initiator of the termination (amendment) has the right to refer the dispute to a court decision. If the court decides to terminate or amend the agreement, such a document is considered terminated or amended from the date of entry into force of the court decision (unless a different date of entry into force has been established by a court decision).

At What Point Is the Contract Considered Terminated if It Is Terminated Unilaterally?

The agreement can be terminated unilaterally only if it is provided for by the agreement. Otherwise, if the unilateral refusal is not provided for by the contract and one of the parties does not agree to terminate it, this issue should be resolved in court.

That is, the moment of termination of the contract unilaterally is:

1. The next day after the expiration of the period provided for in the contract after the other party receives a notice of termination of the contract (if the possibility of terminating the contract unilaterally is established by the contract).
2. The moment when the party terminating the contract received a response to their message with an agreement to terminate the contract (if the contract does not provide for the possibility of unilateral termination of the contract).
3. The date of entry into force of the court's decision to terminate the contract.

What Conditions Should Be Foreseen in the Draft Agreement for the Possibility of Its Unilateral Termination?

First of all, the draft agreement should provide for the possibility and grounds for unilateral termination of the agreement. For example, you can formulate the text as follows: "Each of the parties has the right to early terminate this agreement, notifying the other party in writing about this no later than 20 days before termination".

It is also appropriate to provide the method and procedure for written notification of the intention to terminate the contract. For example: "A written notice of intent to terminate the contract must be sent to the mailing address of the other party by registered mail with a description of the attachment and a receipt acknowledgment".

We also advise you to provide for the correct termination of the relationship and the end of the provision of started services, as well as the procedure and terms of payment for the rendered services.

How to Notify the Other Party of the Intention to Terminate the Contract?

The other party must be notified in writing of your intention to terminate the contract. There are two most popular options for such a notification:

1. By courier delivery. But it is imperative to get a mark on the second copy of its receipt by the other party.
2. Send by registered mail with a description of the attachment and a return message.

Is It Possible to Report the Termination of the Contract and Announce a New Purchase if the Supplier Has Already Been Sent a Letter of Intent to Terminate the Contract?

Please note that early termination of the agreement on the initiative of one party, when the agreement provides for such an opportunity, occurs in the manner prescribed by the relevant clauses of the agreement. Also, a notice of intent to terminate the contract must be sent within the period provided for by the contract.

For example, if the agreement stipulates that the party that intends to terminate the agreement must notify the other party no later than 30 calendar days before the date of such termination, respectively, you can report the termination of such an agreement no earlier than the next day after the expiration of 30 days from the date of notification the other side.

In such a situation, we recommend announcing a new purchase after the publication of a report on the termination of the contract.

Do I need to Publish the Protocol of the Authorized Person in the Report on Termination of the Contract?

In case of termination of the procurement contract, the report on the implementation of the procurement contract is published within 20 working days from the date on which the parties agreed to terminate their obligations under such a contract.

Please note that Article 42 of the Law of Ukraine "On Public Procurement" contains information on what the report should contain. This article also provides that the report on the implementation of the procurement contract may contain other information. Therefore, along with the report, you can publish the protocol, at the same time, this is your right, not an obligation.