Contract termination is the legal act by which one or both parties bring a continuing contract to an end for the future. Under Swiss law, termination is distinct from rescission (which retroactively cancels the contract) and is governed by specific rules depending on the type of contract concerned. Deadlines, forms and effects vary considerably depending on whether the contract is a lease, employment contract, mandate or commercial contract. PBM Avocats in Geneva and Lausanne assists its clients in all situations involving the end of a contract.
Types of Termination Under Swiss Law
Swiss law distinguishes several modes of termination for continuing contracts:
| Type | Definition | Examples |
|---|---|---|
| Ordinary termination | With notice, without particular reason | Lease (art. 266 CO), employment (art. 335 CO), mandate (art. 404 CO) |
| Immediate termination (just cause) | Without notice, for serious cause | Employment (art. 337 CO), mandate (art. 404 CO), lease (art. 261a CO) |
| Amicable termination | Mutual agreement of parties, at any time | Any type of contract |
| Termination by withdrawal | Unilateral legal right (e-commerce) | Distance contracts (arts. 40a et seq. CO), 14 days |
| Automatic termination | Automatic on expiry of the term | Fixed-term contracts without renewal |
Termination Deadlines by Contract Type
Legal termination deadlines vary considerably:
- Employment contract: during probationary period 7 days; thereafter: 1 month during the 1st year, 2 months from the 2nd to the 9th year, 3 months from the 10th year (art. 335c CO); longer deadlines may be agreed;
- Residential lease: 3-month notice for a legal termination date (March, June, September, December in Geneva according to local custom); cantons and local customs specify the legal dates;
- Commercial lease: generally 6-month notice, for a customary date;
- Mandate: termination possible at any time (art. 404 CO), indemnity if at an inopportune time;
- Commercial agency: 1 to 3 months depending on the duration of the contract (art. 418o CO).
The Form of Termination
The form required for termination depends on the contract and legal requirements:
- Termination of a residential lease must comply with a special form provided by the canton (official form in Geneva and in the canton of Vaud);
- Termination of an employment contract is in principle oral or written, but the employee may require reasoned written termination (art. 335 para. 2 CO);
- Termination of a mandate is free as to form;
- For all contracts, termination by registered letter with acknowledgement of receipt is recommended for evidentiary reasons.
The Effects of Termination
Termination brings the contract to an end for the future (ex nunc). The main consequences are:
- Cessation of obligations: the parties are no longer required to provide future performance;
- Preservation of acquired rights: performance already provided and rights arising before termination remain valid (wages due, rents due, fees earned);
- Post-contractual obligations: certain contracts provide for surviving obligations (confidentiality, non-competition, return of documents);
- Damages: an abusive or non-compliant termination engages the liability of the offending party.
Abusive Termination and Its Consequences
Under Swiss law, certain terminations are characterised as abusive and may give rise to additional indemnities. In employment law (art. 336 CO), an abusive notice is constituted by: notice given by reason of the employee's personal qualities, in the exercise of a constitutional right (lawful strike), in retaliation, or at an inopportune moment (pregnancy, illness, military service). The indemnity for abusive notice may amount to 6 months' salary (art. 336a CO). For leases, abusive termination may be annulled by the competent conciliation commission.
In the matter of commercial contract breach, the contractual liability of the party that terminates without complying with the prescribed forms or deadlines entails damages corresponding to the harm caused to the other party.
Frequently Asked Questions on Contract Termination in Switzerland
What is the difference between termination and rescission of a contract?
Rescission (arts. 107–109 CO) applies to contracts with instantaneous performance and has retroactive effect: the parties are restored to the situation prior to the conclusion of the contract. Termination, on the other hand, applies to continuing contracts (lease, employment, mandate, insurance) and has ex nunc effect (for the future only): benefits already provided remain acquired. This distinction is fundamental as it determines the restitutions and indemnities due.
Can a fixed-term contract be terminated before its expiry?
In principle, no. A fixed-term contract binds the parties until its natural expiry, unless an early termination clause is expressly provided, there is mutual agreement of the parties, or just cause arises. In employment law (art. 337 CO) and tenancy law (art. 261 CO), specific rules allow early termination for just cause. In the absence of such rules, the party that terminates prematurely engages its contractual liability for the harm caused to the other party.
What constitutes just cause for immediate termination in contract law?
Just cause (Wichtiger Grund) is a general concept present in several continuing contracts: art. 337 CO (employment), art. 404 CO (mandate), art. 418r CO (agency). It is a serious fact that makes continuation of the contract intolerable or unreasonable, independently of ordinary termination deadlines. Jurisprudence assesses just cause in concreto according to all circumstances. Proven bad faith, serious and repeated violation of essential obligations, or total loss of confidence may constitute just cause.
Are fees linked to the termination of a commercial subscription legal in Switzerland?
Termination fees or penalties for early termination of a subscription (telephony, fitness, insurance) are in principle lawful if they were clearly communicated before the conclusion of the contract and are not disproportionate (art. 8 UCA). The consumer has the right to be informed of these fees in advance. Fees manifestly excessive in relation to the actual damage suffered by the provider may be requalified as a penalty clause subject to judicial reduction (art. 163 para. 3 CO).
How to terminate a contract concluded online (e-commerce) in Switzerland?
For contracts concluded at a distance or off-premises (e-commerce), arts. 40a et seq. CO provide a 14-day right of withdrawal without reason and without charge. This right must be exercised by a clear declaration (withdrawal form or letter). After this period, termination is carried out according to the conditions of the contract or the legal rules applicable to the type of contract concerned. If the general conditions provide for automatic renewal, the consumer must comply with the termination deadlines provided, which must be reasonable (UCA art. 8 jurisprudence).