Purchase Agreement Termination Letter (Samples & Examples)

A purchase agreement termination letter is a formal declaration written by a firm/company to another producer/company/firm to cancel a purchase agreement signed between them. The most common reasons why most people cancel purchase agreements are:

  • Breach of contract by the other party; or
  • Failure of a condition/event to be approved as called for in a contingency provision
  • Misrepresentation by their agents

The act of canceling an agreement is considered unilateral since the cancellation is usually undertaken by only one party. A termination letter is meant to halt any remaining activities that were to be performed under the purchase agreement. It also eliminates any future enforcement of the agreement from the moment of cancellation. The cancellation of an agreement does not, however, affect any legal consequences and liabilities for events that were undertaken before the cancellation.

On the other hand, rescission of either a complete real estate transaction or an unexecuted purchase agreement is a bilateral agreement in which both parties retroactively annul terminate the purchase agreement from the moment it was entered into.

Whereas a cancellation brings a purchase agreement to an end and eliminates any future obligations under the agreement, a rescission restores both parties, i.e., the buyer and the seller, to their respective positions before entering into the purchase agreement. When a purchase agreement has been reclined, it is as though the parties never agreed to the agreement. A rescission is willingly accomplished as part of a mutual agreement to terminate the purchase agreement made between the seller and the buyer, known as a release and waiver agreement.   

A termination letter to purchase agreement is a formal letter and has to be written with professionalism. It must contain the reasons why the purchase agreement is being canceled, and the reasons must be valid. Before signing an agreement, it is advisable to have a lawyer review it and advise you.

Reasons Why Most People Terminate a Purchase Agreement

There are numerous reasons why a buyer may decide to terminate a purchase agreement. The most apparent reason why most buyers terminate their agreement is usually that they are dissatisfied with the inspection, thereby exercising their right to walk away.

Here are some of the reasons why a buyer may decide to walk away from a purchase agreement:

  • Unrestricted right to terminate the agreement during the inspection period
  • Failure to obtain financing during the purchase
  • Object to the title commitment
  • Low appraisal unsuccessfully negotiated
  • Failure to close the agreement on the agreed date
  • Failure to disclose known conditions by the seller
  • Seller’s failure to make repairs as agreed upon
  • Restricted access by the seller to the property while under contract

What You Should Do Before Terminating an Agreement

  • Read Your Agreement: Before signing an agreement, it is always advisable to have your lawyer or agent go through the agreement so a situation where you will be bound to completing a purchase that will not be of any benefit to you. Ask your lawyer/agent to explain to you the cancellation clauses available in the agreement. Some states provide that all inspections are completed upfront, and once a purchase offer has been signed, then the offer is binding. In contrast, in others, the inspection takes place after the proposal has been approved and provides for the refund of the buyer’s deposit should the offer be canceled before/after an inspection.
  • Cancellation Before A Contingency Period: In some states, one is allowed to perform a home inspection only after the purchase agreement has been signed. In some instances, the buyer might uncover significant defects that may force them to cancel the agreement. The property condition might be covered in the agreement as a contingency period. Having your lawyer go through the agreement will help you avoid being bound to purchase a property that is of less value than advertised.
  • After Expiration Of Inspection Periods: The standard default period in most counties is usually 17 days for inspections. However, the buyer still retains the right to cancel an agreement, and the period is extended until all the contingencies are withdrawn. Simply put, the buyer does not lose the right to cancel simply because the contract cancellation period has lapsed. It, however, continues until such a time when the seller objects.

How to Cancel a Purchase Contract

  • Ask About The Cancellation Upfront: Before signing an agreement, you should ask your agent if the agreement is non-binding, i.e., if you can be released from the agreement for any reason whatsoever. This is to avoid entering into an agreement where you shall be forced to make a purchase after signing the contract or face legal battles if you fail to the purchase agreement.
  • Ask The Broker For a Cancellation: It is important to note that exclusive rights-to-sell listings usually contain a safety or protection clause. If the agent refuses to terminate the contract, then you should contact the agent’s Broker whom the Broker is representing.
  • If The Broker Refuses To Cancel: Should the Broker refuse to cancel the agreement, you should ask the Broker to assign another agent to you. In most cases, the Broker will be happy to assign another agent to keep the listing in-house.
  • Reach Out to a Real Estate Lawyer: If you can’t seem to find any solution, contact a real estate lawyer to help you with the termination. Before contacting the lawyer, make sure to inform the Broker of your intentions to do so. At times that’s enough to get a release. You must, however, bear in mind that a promise is a promise. The lawyer may, however, find ways of arguing the case to your favor.

Sample 1: Termination Letter to Purchase Agreement

Termination Letter To Purchase An Agreement









Subject: Purchase agreement termination letter

I write this letter to you to regretfully inform you that our company is terminating the purchase agreement XXX (provide reference number), which was signed on XXX (provide date) for a period of XXX (can be months, years). The termination of the contract was due to unavoidable circumstances such as numerous complaints from our esteemed customers regarding the quality of various products from your company and late delivery of the goods and questionable behavior from your staff.

Due to poor quality of goods, we have incurred a huge loss on our side; our company needs reimbursement of the goods as written in the signed agreement have attached all the relevant documents that will aid in the termination process request you to fully cooperate so that the required legal procedures can be completed quickly.

Yours sincerely,

Name of the sender

Name of the designated person

Company’s name

File Format
  • MS Word

Sample 2: Termination Letter To Purchase Agreement

Sample Termination Letter To Purchase An Agreement

Hailey Thomas,

2859, Ralph Street

Madagascar, 60922

Mrs. Jane Frank


Hillcrest retailers and wholesale traders

2630, Adams Street

Boston 9610


Dear Mrs. Jane,

We candidly regret to inform you that as of tomorrow, 02/03/2010, our legal purchase agreement contract will be terminated. I will no longer require your goods and services. I have been pleased with your dedicated quality goods and service for the last three years, and it is my wish that you harbor no ill feelings, and we part on good terms.

This decision was made due to our business contract being purchased by a larger company, and the firm will be able to provide extra goods and services and also the delivery of the goods will be done at the wee hours of the day to avoid any congestion during the day.

Kindly note that all the outstanding orders will be delivered, and my purchase agreement with Hillcrest retailers and wholesale traders expires on 02/05/2010. This letter acts as notice not to renew the contract.

Please feel free to contact me at (333-589-2593) regarding further information about the discontinuation of the contract.

Best wishes,

Hailey Thomas.

File Format
  • MS Word

About This Article

Justin W. Heeg
Authored by:
Contract Specialist, Business & Real Estate Attorney
Justin W. Heeg, Esq., founder of Heeg Law PLLC, brings extensive expertise in legal contract writing, with a special focus on real estate, complemented by a strong foundation in trusts and wills. Previously a prominent figure at Dwight Capital, a premier U.S. commercial real estate lender, Justin played a pivotal role in shaping their mortgage REIT strategy and overseeing legal compliance. His tenure at the esteemed law firm Skadden, Arps, Slate, Meagher & Flom LLP saw him facilitating significant real estate transactions, advising top-tier lenders, and equity firms. With his rich legal background, Justin stands as a trusted expert in both business and real estate law.

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