Terminating a contract for good cause
A general, not uniformly codified principle
Swiss contract law does not contain a single rule on termination for good cause applicable to all contracts: certain named contracts have an explicit rule, such as employment contracts (art. 337 CO) or agency contracts (art. 404 CO), while for other ongoing contracts, Federal Supreme Court case law has developed a general principle allowing immediate termination when continuing the contract becomes unbearable for a party.
What constitutes good cause
Good cause generally requires a serious breach of contractual obligations by the other party, a breakdown of the trust essential to the contract, or circumstances making the continuation of the contractual relationship objectively unbearable under the rules of good faith. The assessment is made case by case, taking into account the nature of the contract and the severity of the facts invoked.
The consequences of immediate termination
Termination for good cause ends the contract with immediate effect, without observing the ordinary notice periods. If the good cause invoked is not recognised as sufficient by a court, the terminating party is exposed to a claim for damages for unjustified termination, calculated according to the rules specific to the type of contract concerned.
Frequently asked questions
Can any contract be terminated for good cause?
Ongoing contracts (lease, employment, agency, simple partnership, etc.) lend themselves particularly well to this. For contracts without an explicit legal rule, Federal Supreme Court case law recognises this principle under strict conditions.
What is the risk if the good cause invoked is not recognised?
Immediate termination may be considered unjustified, exposing the terminating party to a claim for damages from the other party, according to the rules applicable to the type of contract concerned.
Does good cause need to be notified in writing?
The law does not always require a written form depending on the type of contract, but a reasoned written notice is strongly recommended to be able to prove the reality and severity of the grounds invoked in the event of a dispute.