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How to withdraw from a contract: what a withdrawal is and when to exercise it

Withdrawal allows the parties to free themselves from contractual obligations before their natural expiry. Let’s see in more detail how to withdraw from a contract and when it is possible.

How to withdraw from a contract: what a withdrawal is and when to exercise it

What is the withdrawal?

The withdrawal has the right to dissolve a contract end it before its expiry. This faculty is established by law for certain contracts or by the parties, by inserting a specific clause in the contract.

You can make use of the withdrawal if:

  • the law provides for this for the specific contract (legal withdrawal). For example, for procurement contracts, the civil code provides for the customer to withdraw by paying compensation to the contractor;
  • if it has been agreed in the contract (conventional withdrawal). For example, the parties provide for a termination clause from a lease which allows the tenant to withdraw from the contract, giving one month’s notice;
  • if an event occurs that affects the fiduciary nature of the relationship (withdrawal for just cause). For example, it is possible to withdraw from the agency agreement when the agent has applied prices that are completely out of the market, thus breaking the relationship of trust between the parties. Withdrawal for just cause usually applies to contracts of agency, distribution, business finder, employee work.

A particular case of withdrawal (so-called withdrawal of repentance) is provided for by the consumer code for contracts concluded at a distance and away from business premises. This is the case, for example, with online purchases or door-to-door sellers. In these cases, the consumer can withdraw from the contract, within 14 days, without having to provide any reasons or pay additional costs.

How to withdraw from a contract

After verifying the possibility of withdrawing, the interested party must communicate to the other the will to terminate the contract. The withdrawal produces its effects only from the moment in which the party to whom it is directed receives it. Usually, the withdrawal letter is sent by certified e-mail or registered letter with a return receipt.

To withdraw, the terms specified in the contract or by law must be respected. For example, in the case of distance selling, the consumer code provides for the possibility of withdrawing within 14 days of purchase.

In contracts for immediate execution (e.g. sale) the party can withdraw until the execution of the contract has begun. For example, in the case of the sale, one of the parties can withdraw until the price of the purchased good has been paid.

In contracts with continuous or periodic execution (eg periodic supply of goods), it can be exercised even after the start of execution. In this case, the withdrawal has no effect on the services already performed.

Difference between withdrawal and termination

Withdrawal and termination are often confused. In both cases, the parties express their will to free themselves from contractual obligations and put an end to the contract.

Cancellation is the necessary action to communicate to the counterparty the desire not to renew a duration contract (eg a subscription or a cancellation of the lease contract). The termination, therefore, serves to prevent the automatic renewal of the contract upon expiry.

The deadline for cancellation and how to communicate it are indicated in the contract (e.g. cancellation to be communicated 30 days before the contract expires by registered letter with return receipt).

Difference between withdrawal and termination

Even the resolution involves the cessation anticipated in the contract. The parties will be able to use it only upon the occurrence of certain specific conditions:

  • in the event of non – fulfillment by one of the parties (in contracts for corresponding benefits);
  • if the performance of a party becomes impossible to achieve;
  • in a contract that lasts over time, the price that one party owes the other increases excessively;
  • the parties agree to terminate the contract.

For example, if an artist does not deliver the requested work to the client within the established time frame, he can ask the judge to terminate the contract and get back any amount paid.

How to provide for the withdrawal in the contract

The parties can agree to insert clauses in the contract that recognize the right to dissolve the contractual bond. Some examples of such agreements are:

  • a clause that provides for the free choice of the parties to withdraw without the need for reasons (withdrawal ad numb);
  • a clause that makes the withdrawal subject to the occurrence of a specific event (bound withdrawal);
  • to impose the payment of a sum by way of consideration or sanction in the event of withdrawal (confirmation deposit and penitential fine).