Purchase Order Cancellation Letter
Cancelling an order late is costly, but cancelling it badly is worse. This letter template cancels a purchase order formally while proposing a fair settlement of costs.
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When and how to use this letter
Send this letter the moment the cancellation decision is final, by email with read receipt, followed by a phone call to confirm the supplier stopped work. Speed directly limits your liability.
Stay factual and unemotional. State the PO number, the cancellation date, the reason, and your settlement proposal. Even if the supplier caused the problem, a calm letter keeps the door open for negotiation and looks better if the dispute escalates.
Include what to avoid: do not cancel by phone alone; without written notice, the supplier can claim work continued in good faith. Do not ignore the supplier's legitimate costs already incurred; refusing to discuss them usually ends in legal action that costs more. Avoid cancelling orders that are already in transit without arranging return or refusal at delivery.
What happens next: the supplier confirms cancellation, submits a claim for costs incurred with evidence, and both sides agree on the final settlement. A practical tip: ask the supplier to mitigate by reselling or repurposing the materials. Courts generally expect the supplier to limit its losses, and raising mitigation early leads to fairer settlements. Keep all cancellation correspondence in one file with the original PO, since settlement discussions often revisit what was said in the first letter.
Frequently asked questions
Can I cancel a purchase order after the supplier starts work?
How fast should I notify the supplier of cancellation?
Can I cancel without penalty if delivery is late?
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