Let us separate Manager procedures from other accounting issues.
As @Davide wrote, the cancellation fee should be recorded as a payment (it will be credited to a bank account and debited somewhere). But the debit account selection will depend on local law and the terms of your contract. It might be debited against the liability account, if you were legally obligated to pay for the full 60 months of service. But it also might be considered a current expense.
If debited against the liability account, the fee might or might not be fully allowed in the current year. Again, this is a matter of local law.
The question of what to do with the remaining balance of the contract also depends on whether you were legally required to pay. If so, the forgiven debit would normally be classified as income, as @Davide described. If not, however, there might just be a credit elsewhere, probably to an appropriate equity account (depending on your legal structure) to balance the debit of the remaining balance.
It is also worth mentioning that, if you were not legally required to pay for the full 60 months of service, there is a question as to whether the full contract amount should ever have been shown as a liability in the first place. This situation is one where the advice of a qualified local accountant would be helpful. Forgiven debts can be tricky accounting situations. The transaction recording in Manager is quite simple, whatever the answers.