Withdrawal from a contract

What it means

Withdrawal from a contract is a unilateral act by which a party cancels the contract. It is possible only where the law or the contract allows it, typically for a material breach by the other party, for example when a supplier fails to deliver on time or the goods are defective.

Withdrawal differs from termination by notice. Notice ends the contract for the future, whereas withdrawal generally cancels it from the start. The parties must then return what they have received from each other, such as the price paid and the goods delivered, unless the contract or the law provides otherwise.

Special rules apply to consumers. Under a distance contract, for example through an online shop, a consumer may withdraw without giving reasons within a statutory period, usually 14 days from receiving the goods. If the seller fails to inform them properly of this right, the period is extended.

How it works in practice

In a dispute with a supplier we first check whether the breach is material and whether the contract requires a notice and an additional deadline first. We send the withdrawal in writing, stating the reason precisely. An improper withdrawal may be invalid, and the withdrawing party may itself end up in default.

In the books, withdrawal is reflected through a credit note or corrective invoice that reverses the original revenue or expense. If goods are returned, we also adjust inventory and VAT. When an advance is refunded, we check in which tax period the correction belongs.

For clients with an online shop we prepare terms and conditions with information on withdrawal and a model form. Refunds to consumers must be made within the statutory period, and the seller may wait until it has received the goods back or proof that they have been sent.

What to watch out for

Withdrawal does not cancel everything. Contractual penalties, claims for damages and dispute resolution clauses generally remain in force. A party that withdraws to escape a penalty may be disappointed.

Withdrawal and a warranty claim are not the same. If goods are defective, the consumer first exercises the rights arising from liability for defects, and withdrawal comes into play only for a defect that cannot be remedied or keeps recurring. Mixing the procedures up leads to needless disputes and complaints to the inspectorate.