Posted On 07th February,2017
The purpose of this article is to examine how possible it is to terminate a telecoms contract early.
It is such a shame that the majority of telecoms companies lock their customers into long-term contracts – and leaving them can be very costly. Telecoms technology is rapidly evolving so entering into a long-term contract could restrict your ability to keep up with trends. We often see long-term contracts signed where the business principle was unaware of the contract and/or the renewal terms. In contrast with utility services, were fuel costs always seem to rise – telecoms prices are reducing all the time – so being locked into a long-term contract does not always represent best value.
How can I terminate a contract early?
This will largely depend on why you wish to terminate. If your supplier is providing a sub-standard service, then you may be able to give notice to terminate the contract if you feel the supplier has failed to deliver on their promises to such an extent it is considered a “fundamental breach”. The breach level; minor, material or fundamental, will depend on the extent of the under-performance of your supplier. The breach may not be so severe it would be considered a “fundamental breach”, but you may still be entitled to pursue a legal action against your supplier for damages, which may include your loss of profit. The threat of a legal action may convince your supplier to relax the contract terms and allow you to exit the contract.
You can download a template letter for fundamental breach here.
If you do not have grounds for a breach, then it will be very difficult for you to exit a contract without being exposed to early termination charges. Always ask for a signed copy of your contract. Study the contract carefully to ascertain if there are any services being provided which are not included in the contract. We recommend you contact your provider and negotiate an early settlement.
What does OFCOM say?
A telecoms supplier must be authorised by OFCOM and be a member of an ADR scheme, like the Ombudsman or CISAS. You can check on OFCOM’s website which ADR scheme applies to your supplier here. The purpose of the ADR scheme is to assist with the resolution of a dispute between you and your supplier. This service is free to you – and your supplier will need to finance the investigation. This action may enable you to reach a compromise, or it may persuade your supplier to relax the terms of the contract to avoid an ADR investigation.
Using a Contracts Register
We would always recommend the use of a Contracts Register. It is quick to formulate and you can schedule just a few minutes to review each month or quarter to ensure you are in control of your contracts and giving notice of termination at the right time. Just a few columns in Excel will do the trick; eg. Supplier, Contract End date, Notice Period, Next Action date. Ensure you have read the contract and that you have extracted the correct notice period and how the notice should be delivered. Ensure auto-renewal is not active on the contract. Consider giving notice, even at the start of the contract, as this will mitigate against forgetting to give the required notice. This is a useful tool for all contracts for your business.
Our advice is do not commit to a lengthy term with a supplier – it can only benefit your supplier – and not you. If you wish to terminate a contract with your supplier early, and communication has broken down, you will run the risk of legal action from your supplier. If you are convinced your supplier has failed to deliver on their promises to the extent of a “fundamental breach”, then you may successfully defend a legal action from your supplier. The final decision is with you.
Anyone considering court action due to breach of contract should seek expert legal advice before proceeding. Court disputes are a lengthy and costly procedure and the legal costs should be weighed up against the likely damages awarded.