Terminating a business partnership: avoid legal pitfalls

When a partnership starts, and then suddenly ends

You have entered into a business partnership with enthusiasm, such as a joint venture, a franchise agreement, or a long-term supply relationship. Everything runs smoothly until circumstances change and it suddenly hits a wall. One party wants to quit, the other wants to continue, or both parties want to end the partnership but are stuck in a complex web of financial obligations.

How do you end such a professional relationship properly? Simply stopping activities often leads to escalation, damage claims, and lengthy legal proceedings. Careful, contractual settlement is essential to protect your business.

How is a partnership agreement actually terminated?

Most professional agreements contain specific provisions regarding termination, such as a notice period or stipulated grounds for termination. If the agreement does not have an explicit termination clause, common law applies: you can terminate, but you must observe a reasonable notice period.

In addition, in cases of breach of contract, the possibility of rescission plays a role. If the other party fails to fulfill their agreements, the law offers tools to terminate the partnership prematurely. A written and motivated notice of termination is always the best guarantee against later discussion regarding the validity of the termination.

Breach of contract, rescission, or termination: what is the difference?

It is crucial to understand the difference between these terms. In the case of a breach of contract, there is an attributable failure: the other party is not doing what was agreed, which allows you to rescind the agreement and sometimes even claim damages. Rescission often has retroactive effect and in many cases requires restitution.

Termination, on the other hand, focuses on the future. You end the relationship without necessarily having to show a failure on the part of the other party. It is a more 'neutral' way of ending things, but even here, the notice period and the manner of communication determine the legal viability of your actions.

What happened in this case at the Amsterdam Court of Appeal?

In the case ECLI:NL:GHAMS:2026:178, a long-standing conflict between a franchisor and its franchisee was at play. The franchisor terminated the agreement unilaterally due to alleged shortcomings, including the failure to provide a bank guarantee and the failure to carry out store renovations. The franchisee disputed the lawfulness of this.

The central issue was whether the termination was valid and whether damages were still owed. While the lower court sided with the franchisor, the Court of Appeal ruled differently. The manner in which the termination was brought about and the poor substantiation of the shortcomings caused the franchisor to ultimately become liable for damages itself.

The ruling of the court

The Amsterdam Court of Appeal put a stop to the unilateral termination by the franchisor. The judgment shows that simply 'terminating' based on unclear or no longer applicable terms has major financial consequences. Because the franchisor could not demonstrate that the termination complied with contractual requirements and reasonableness, the franchisee's claim for damages was awarded.

The lesson here is clear: simply pointing out a shortcoming is insufficient. The legal process surrounding a termination must be followed strictly according to the contract and the law, otherwise, you will end up bearing the costs of the termination yourself.

What does this mean for you when ending a partnership?

• Clearly define agreements regarding cancellation and notice periods in the partnership agreement, preferably with concrete grounds.
• Always record the termination in writing and with reasons, observing the agreed or a reasonable notice period.
• In case of breach of contract: duly list the shortcomings and give the other party a formal notice of default before proceeding to rescission.
• Ensure that outstanding items, ongoing deliveries, and any confidentiality or non-compete clauses are properly settled upon termination.
• Keep evidence of the settlement — emails, agreements, and payments — so that your position is demonstrable in the event of a later claim.
• Engage a lawyer immediately upon termination of a valuable partnership; a careful settlement prevents expensive procedures and unexpected damage claims.

What do you do now?

Are you facing the termination of a business partnership or has a dispute already arisen regarding termination or an alleged breach of contract? Do not wait too long to seek legal advice. A thorough process helps you terminate the agreement correctly and prevents you from being left with unpaid bills or a substantial damage claim.

Ruling

This blog post is based on ECLI:NL:GHAMS:2026:178.