What You Need To Know About Contracts – Part 2 – Termination

Contract termination

Planning the end of the contractual relationship is something no party likes to talk about when entering in to a contract. Despite this, planning an exit may be necessary for a variety of reasons.

Why Terminate?

Termination could arise for a variety of reasons, such as a party breaching their obligations under the contract or ceasing trading or simply there being no need to carry on the contractual relationship. If the contract does not contain adequate provisions relating to termination, it could give rise to legal problems.

Types Of Termination

In every contract you enter in to you should ensure there are provisions allowing you to terminate the contract for convenience. This right will allow you to end the contract at any point for any reason. This can be used as a way to cap your risk where you have accepted a high amount of liability because if things go wrong you can always terminate and stop your total exposure increasing. This could be particularly helpful if you have no liability cap or a particularly high one. (see our Part 1 of our series on the importance of liability caps: http://contractcanary.com/contract-101-part-1-liability-caps

Whilst termination for convenience is key, you should also ensure your agreement deals with termination of the agreement where the other party is wound up, dies (if the other persons an individual) or there is a breach of the agreement.

What If There Is No Termination Clause?

This will depend on the contract, but if you cannot negotiate a termination provision, you need to ensure there is no obligation on you to supply your goods or services or that any such request from the other party is subject to your acceptance. Technically if there is no requirement on you under the contract to supply your goods and services or you must consent to such provision, you wouldn’t necessarily have to terminate the contract. If this is not the case, then you would have to agree a mutual termination.

Contract Review

To ensure your agreement contains sufficient termination provisions, purchase one of our packages: http://www.contractcanary.com/shop

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