For many entrepreneurs, terminating a cooperation agreement is not an easy decision. Partnerships often start with trust and shared ambitions, but can come under pressure in practice. When agreements are structurally not honoured, communication breaks down or trust is lacking, the question arises: may I terminate the cooperation and what are the consequences?
In this article you will read when you can terminate a cooperation agreement, what legal routes are available and how to limit damage and risks.
What is a cooperation agreement?
A cooperation agreement (also called a collaboration contract) is an agreement in which two or more parties record arrangements about a joint venture or activity. This is common among:
- entrepreneurs who start a general partnership (VOF) together;
- freelancers or self-employed persons who cooperate on a long-term basis;
- commercial partnerships without a company structure;
- project-based collaborations.
The contract usually contains agreements on tasks, powers, profit distribution, costs, decision-making and termination.
When does the desire to terminate a cooperation agreement arise?
The wish to terminate a cooperation agreement usually does not arise suddenly, but from recurring problems. Common signals include:
- agreements are not being honoured;
- one party structurally contributes less;
- differences of opinion about the direction of the cooperation;
- financial ambiguity or distrust;
- personal tensions that affect business.
Many entrepreneurs wait too long at this stage, hoping the situation will improve. However, this often increases the damage.
Terminating a cooperation agreement: what does the contract say?
The first step when terminating a cooperation agreement is to review the arrangements that were made. Pay particular attention to:
- termination clauses;
- grounds for dissolution;
- notice periods;
- penalty or compensation clauses;
- dispute resolution provisions.
Some contracts can be terminated relatively easily, while others only in the event of a breach (non-performance).
Dissolution or termination: what is the difference?
Dissolution of the cooperation agreement
Dissolution is possible when the other party fails to fulfil its obligations. Consider:
- not delivering the agreed work;
- not meeting financial obligations;
- systematically acting contrary to agreements.
With dissolution, the contract is terminated due to non-performance. This often also gives rise to a right to compensation.
Termination of the cooperation agreement
Termination concerns ending the agreement for the future. This is only possible if the contract allows it or if reasonableness and fairness require it.
Careless termination can lead to liability.
What if the other party does not honour agreements?
When a cooperation partner does not comply with agreements, this often constitutes non-performance (breach of contract). This can be grounds for terminating the cooperation agreement.
In many cases, it is wise to first:
- address the other party in writing;
- clearly state which agreements are not being honoured;
- give a reasonable period to still comply.
This strengthens your legal position if termination or proceedings become necessary.
Consequences of terminating a cooperation
Terminating a cooperation agreement has consequences for:
- ongoing obligations;
- distribution of revenues and costs;
- use of shared resources;
- clients and suppliers;
- possible damage claims.
A careful settlement is essential to prevent further conflicts.
Terminating a cooperation agreement within a general partnership (VOF)
In a VOF, terminating a cooperation is particularly sensitive. Partners are personally liable for the debts of the business.
An incorrect termination can mean that you remain liable even after departure. Legal advice here is not a luxury, but a necessity.
International partnerships
In international partnerships, additional questions may arise, such as which law applies and which court has jurisdiction.
General information about cooperating as an entrepreneur can be found at the Chamber of Commerce.
Common mistakes when terminating a cooperation agreement
- terminating too quickly or carelessly;
- not taking notice periods into account;
- letting emotions take over;
- not documenting evidence;
- litigating without strategy.
What can Arslan Advocaten do for you?
Arslan Advocaten assists entrepreneurs with terminating cooperation agreements. We analyse your position, advise on the right approach and guide negotiations or legal proceedings.
Also read more about our expertise in corporate law, our experience with conflicts with business partners and terminating a general partnership (VOF).
Costs and litigation funding in cooperation disputes
In disputes about terminating a cooperation agreement, we do not work on a no cure no pay basis in principle. Such cases require a careful legal approach.
However, this does not mean you have to bear these costs yourself. In many commercial disputes, it is possible to use litigation funding.
We work together with an independent litigation funder who, after a substantive assessment of your case, may decide to pay all litigation costs. This includes, among other things:
- legal fees;
- court fees;
- any expert costs;
- costs on appeal.
If litigation funding is granted, you as a client do not have to pay these costs yourself. The litigation funder bears the financial risk.
The litigation funder only receives compensation upon a positive outcome. For you, this means that litigation is possible without having to incur costs in advance or during the proceedings.
About the author
This article was written by Onur Arslan, lawyer and founder of Arslan Advocaten. He specialises in commercial disputes, including conflicts about cooperations and general partnership structures.
Would you like to discuss whether and how you can legally terminate your cooperation?