Description

Termination Agreement

Summary

This Termination Agreement is a generic termination agreement that can be used by parties to many types of commercial contracts. It also includes an optional release of claims. Most commercial contracts are expected to end when:

• The term of the contract expires in the normal course.
• Both parties have completed the performance of their contractual obligations.

In some situations, however, one of the parties terminates the agreement before its intended expiration by exercising:

• Rights granted under applicable statutory or common law.
• An express contractual right of termination for cause or convenience.

In other situations, the parties mutually agree to early termination, either because:

• They both desire to exit from an unproductive or unsatisfactory arrangement.
• At least one party has the right to terminate and they agree to enter into a mutual termination that either or both:
  • settles actual or potential claims; or
  • ties up loose ends.

Details

When contracting parties decide to mutually terminate a commercial agreement, they should execute written documents to:

• Establish the termination date.
• Outline the terms and conditions of termination.
• Release all claims and liabilities of the parties relating to the terminated agreement (if appropriate).

Some commercial contracts contain a no-oral-agreements clause that expressly requires a writing signed by both parties to mutually terminate the agreement. Individuals also refer to no-oral-agreements clauses as a no-oral-modifications clause. Despite the widespread use of no-oral-agreements clauses, courts often enforce unintended oral modifications based on the parties’ words and actions. To ensure that all aspects of an agreed termination are clear and enforceable, parties should avoid oral terminations. A written termination agreement (sometimes drafted as a termination amendment) is more precise and certain. Also, some or all conditions to termination or post-termination obligations may require a writing to be enforceable.

Assumptions

This Termination Agreement assumes the following:

• The parties to the agreement are US entities and the transaction takes place in the US. If any party organizes in, operates in, or any part of the transaction takes place in a foreign jurisdiction, the parties may need to modify these terms to comply with applicable laws in the relevant foreign jurisdiction.
• Parties use these terms in a business-to-business transaction. This Agreement may not be suitable for a consumer contract or a government contract. Due to the fact that such contracts may involve legal and regulatory requirements and practical considerations that are beyond the scope of this resource parties should not use this agreement in consumer or government contracts.
• There are two parties to the underlying agreement and both are legal entities. The parties must make adjustments if:
  • either contracting party is an individual person; or
  • there are more than two parties to the underlying agreement.
• These terms are not industry-specific. This Agreement does not account for any industry-specific laws, rules or regulations that may apply to certain transactions, products, or services. If any transaction- or industry-specific laws, rules or regulations apply to the termination of the contract, the parties must revise the termination agreement to address the impact of those laws, rules or regulations.

Defined Terms

This Termination Agreement assumes that certain defined terms included in optional or alternative language selections (such as Term, Law, Personnel, and Affiliates) are defined in the underlying agreement. If used, conform them to the defined terms used in the underlying agreement. Finally, other Corporate Agreements can be found via the Corporate Agreements category page.