What are the Different Types of Cancellation Agreement?

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  • Written By: Daphne Mallory
  • Edited By: Melissa Wiley
  • Last Modified Date: 16 July 2018
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A cancellation agreement is used to terminate a written contract that’s referenced in the document itself. Three common cancellation agreements are a lease cancellation agreement, a debt cancellation agreement, and a cancellation agreement and mutual release. Without it, the original contract signed by both parties often remains effective and binding for the signatories. Some contracts do contain language about cancellation, but a separate agreement is often a more effective choice and makes clear the intent of the parties to cancel the contract.

A lease cancellation agreement is often used by landlords to terminate a lease prior to its expiration. The tenant and the landlord sign the agreement, which often lists conditions. For example, a landlord may request that the tenant agree to pay rent until the cancellation date and pay an extra amount each month in exchange for the landlord’s agreement to cancel the lease. The agreement also addresses the security deposit, which is often a statement affirming that the landlord will return the deposit to the tenant if the apartment is returned in good condition. If the tenant does not vacate the apartment as specified in the agreement, then the agreement is often ineffective to terminate the original lease.


Lenders sometimes offer a debt cancellation agreement to debtors as part of debt settlement negotiations, in some cases when the debtor dies or when the debtor is unemployed involuntarily. The agreement can often be used to cancel the entire debt or the monthly payments that the debtor is required to pay. In some cases, it’s used to simply suspend the debt and defer payments. Lenders may also use it to reduce the interest, the principle balance owed, or both. A debtor may be able to persuade a lender to cancel the debt after a period of time passes, and this is the legal document the debtor can use to do that.

A cancellation agreement and mutual release is used often in real estate transactions. Sellers may require buyers to sign it for purchase contract cancellation and to return all deposits to the buyers. For example, the sale of a house in a purchase contract may be contingent on the buyer obtaining financing within a certain number of days. If the buyer is unable to get the money to purchase the house, then the seller and buyer need a legal document that officially terminates the contract. That’s the purpose of a cancellation agreement in buying and selling real estate.


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Post 2

@indemnifyme - You're right, some people are awfully shady. It's good you get proper documentation from them when they ask you to cancel their policy.

I actually received a cancellation agreement recently. I settled on some debt and I made sure to get everything in writing! My mom always tells me to make sure to get things in writing and this piece of advice has saved me from a lot of trouble in the past.

Post 1

Cancellation agreements are taken pretty seriously in the insurance industry. In my office we make them sign something as well as provide us with a copy of their declarations page from their new insurance.

This protects us from the insured saying we canceled them without their notice or something like that. It sounds crazy, but some people are willing to lie if it will save them money.

Also, insurance is governed pretty seriously by state law. We need to make sure we are always follow the proper procedures regarding insurance contracts to keep our agency in good standing.

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