Termination for insolvency clause: Copy, customize, and use instantly
Introduction
A termination for insolvency clause allows one party to terminate the agreement if the other party becomes insolvent or faces financial difficulties that impair its ability to meet its obligations. This clause provides a safeguard for businesses, ensuring they are not tied to an agreement with a party that may be unable to fulfill its obligations due to insolvency or similar financial issues.
Below are templates for termination for insolvency clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Standard termination for insolvency clause
This variation provides a general right to terminate in case of insolvency.
Either party may terminate this agreement immediately upon written notice if the other party becomes insolvent, enters into bankruptcy, or makes an assignment for the benefit of creditors. Upon termination, the terminating party will not be liable for any further obligations under this agreement.
Termination for insolvency clause with immediate effect
This variation allows immediate termination upon insolvency.
In the event of insolvency, the non-insolvent party may terminate this agreement with immediate effect. Insolvency is defined as the filing of a petition for bankruptcy or the appointment of a receiver, trustee, or similar official to manage the insolvent party’s assets.
Termination for insolvency clause with cure period
This variation provides a cure period before termination.
If either party becomes insolvent, the other party may terminate this agreement after providing written notice to the insolvent party. The insolvent party will have [number] days from the notice date to cure the insolvency or provide an acceptable plan for resolving the financial difficulties. If the insolvency is not cured within this period, the agreement may be terminated.
Termination for insolvency clause with financial deterioration provision
This variation includes a provision for financial deterioration.
Either party may terminate this agreement if the other party’s financial position deteriorates to the extent that it reasonably appears they will be unable to perform their obligations. Such deterioration may include, but is not limited to, the filing of bankruptcy, insolvency proceedings, or the suspension of payments.
Termination for insolvency clause with no liability upon termination
This variation includes no liability upon termination.
In the event of insolvency, either party may terminate this agreement without any further liability. The non-insolvent party will not be required to fulfill any remaining obligations under this agreement once the termination notice is delivered, and no compensation will be due to the insolvent party.
Termination for insolvency clause with delayed payment provision
This variation includes delayed payment provisions.
Either party may terminate this agreement if the other party becomes insolvent or fails to make any required payments when due and does not cure the payment failure within [specified number] days after receiving written notice. Insolvency is defined as the party’s inability to pay debts as they become due or the commencement of bankruptcy proceedings.
Termination for insolvency clause with asset sale provision
This variation addresses asset sales.
Either party may terminate this agreement if the other party becomes insolvent or if there is a sale or transfer of a substantial portion of its assets without the other party’s consent. This includes situations where the insolvent party’s assets are sold to satisfy creditor claims, and the non-insolvent party reasonably believes that such actions impair the ability to perform under the agreement.
Termination for insolvency clause with notice period
This variation requires a notice period for termination.
If either party becomes insolvent, the other party may terminate this agreement by providing [specified number] days’ written notice. During this notice period, the insolvent party shall remain responsible for fulfilling any obligations incurred up until the date of termination.
Termination for insolvency clause with automatic termination
This variation provides for automatic termination upon insolvency.
This agreement will automatically terminate without further action by either party if one of the parties becomes insolvent or enters into any form of bankruptcy proceeding. The termination will be effective immediately upon the occurrence of such an event.
Termination for insolvency clause with waiver of claims
This variation includes a waiver of claims after termination.
In the event of insolvency, either party may terminate this agreement. Upon termination, the terminating party waives any claims for damages arising from the termination, except for claims that arise due to the insolvent party’s failure to perform prior to the insolvency event.
Termination for insolvency clause with winding-up provision
This variation involves winding-up proceedings.
Either party may terminate this agreement if the other party is subject to winding-up proceedings or if a petition for the liquidation of its assets is filed. The termination is effective upon the initiation of such proceedings, and both parties agree to cooperate in the event of liquidation.
Termination for insolvency clause with financial instability indicator
This variation includes financial instability indicators.
Either party may terminate this agreement if the other party’s financial instability becomes apparent, including insolvency or an inability to meet its financial obligations as they become due. Financial instability may be indicated by missed payments, credit downgrades, or the filing of insolvency petitions, triggering an automatic termination right.
Termination for insolvency clause with third-party creditor involvement
This variation includes creditor involvement in insolvency.
If either party becomes insolvent, or a third-party creditor takes action against the other party’s assets, the non-insolvent party may terminate this agreement immediately by providing written notice. This includes situations where the insolvent party’s assets are seized or subject to claims from creditors that may impair the performance of the agreement.
Termination for insolvency clause with remedy for breach
This variation allows for a remedy in case of insolvency-related breach.
Either party may terminate this agreement if the other becomes insolvent. If termination occurs due to insolvency, the party that terminates may seek any legal remedies available, including damages, for any breach of the agreement prior to termination. The terminating party shall also have the right to offset any amounts owed by the insolvent party.
Termination for insolvency clause with deferred obligations
This variation defers obligations in case of insolvency.
In the event of insolvency, either party may terminate this agreement, provided that the non-insolvent party may defer its obligations until the termination becomes effective. If any obligations were incurred before insolvency, those must be settled by the insolvent party within a specified period following the termination notice.
Termination for insolvency clause with immediate effect and without notice
This variation provides immediate termination with no notice requirement.
Either party may terminate this agreement immediately upon the other party’s insolvency or bankruptcy without any notice requirement. The termination will be effective upon the insolvency event, and the terminating party will have no further obligations under the agreement.
Termination for insolvency clause with mutual termination rights
This variation provides mutual termination rights in case of insolvency.
In the event that either party becomes insolvent, both parties agree that either may terminate this agreement by providing written notice to the other party. The terminating party will not be liable for any further obligations under the agreement once the termination is effective.
Termination for insolvency clause with financial distress events
This variation expands on financial distress events.
Either party may terminate this agreement if the other party experiences any event of financial distress, including insolvency, failure to pay debts as they become due, or the commencement of bankruptcy proceedings. The terminating party will not be responsible for any further performance under the agreement after the termination notice.
Termination for insolvency clause with right to suspend performance
This variation includes a right to suspend performance before termination.
If either party becomes insolvent, the other party has the right to suspend performance of its obligations under this agreement until such time as the insolvent party resolves its insolvency issues. If the insolvency is not resolved within [specified period], the non-insolvent party may terminate the agreement.
Termination for insolvency clause with compensation for non-performance
This variation includes compensation for non-performance.
In the event of insolvency, the non-insolvent party may terminate this agreement. The insolvent party will be liable for any damages or losses incurred by the other party due to the inability to perform the obligations under the agreement prior to termination.
Termination for insolvency clause with impact on ongoing obligations
This variation addresses ongoing obligations after insolvency.
If a party becomes insolvent, the non-insolvent party may terminate this agreement. Any ongoing obligations that were incurred prior to the insolvency event, such as payment obligations or delivery commitments, will still need to be fulfilled by the insolvent party.
Termination for insolvency clause with right to set-off claims
This variation allows for the right to set-off claims.
In the event of insolvency, the non-insolvent party may terminate this agreement and set off any outstanding claims or obligations owed by the insolvent party. The non-insolvent party will retain the right to offset any amounts owed by the insolvent party against any termination fees or other due amounts.
Termination for insolvency clause with effect on confidentiality obligations
This variation specifies the effect of insolvency on confidentiality obligations.
Upon the insolvency of either party, the non-insolvent party may terminate this agreement, but both parties agree to continue to adhere to the confidentiality obligations set forth in the agreement. Any confidential information exchanged must still be protected, even after termination due to insolvency.
Termination for insolvency clause with partial termination rights
This variation provides rights to partially terminate the agreement.
If either party becomes insolvent, the non-insolvent party has the right to partially terminate this agreement, including eliminating specific obligations that are no longer feasible due to insolvency. The remaining terms of the agreement will continue in full force and effect unless otherwise agreed.
Termination for insolvency clause with restructuring opportunity
This variation allows for restructuring before termination.
If either party becomes insolvent, the non-insolvent party may offer the insolvent party an opportunity to restructure or reorganize within a specified period, provided that it can demonstrate the ability to perform its obligations. If restructuring is not successful, the non-insolvent party may proceed with termination.
Termination for insolvency clause with debt restructuring provision
This variation includes a debt restructuring provision.
If a party becomes insolvent, the non-insolvent party may suspend or terminate this agreement. If the insolvent party is able to successfully complete a debt restructuring process within a specified period, the agreement may be reinstated, with adjustments made to the terms as necessary.
Termination for insolvency clause with impact on warranties and guarantees
This variation specifies the impact on warranties and guarantees.
In the event of insolvency, the non-insolvent party may terminate this agreement and any associated warranties or guarantees will become void. The insolvent party will not be obligated to fulfill any warranties or guarantees provided under the agreement after termination due to insolvency.
Termination for insolvency clause with alternative dispute resolution (ADR)
This variation includes an ADR provision.
If a party becomes insolvent, the non-insolvent party may terminate this agreement and pursue alternative dispute resolution (ADR) to resolve any outstanding issues or disputes that arise from the insolvency event. Both parties agree to resolve disputes through mediation or arbitration rather than litigation.
Termination for insolvency clause with notice of anticipated insolvency
This variation includes a notice requirement for anticipated insolvency.
In the event that either party anticipates insolvency, they agree to notify the other party in writing at least [specified number] days before the anticipated insolvency event. This notice will provide the non-insolvent party the opportunity to assess the situation and potentially terminate the agreement or restructure terms as necessary.
Termination for insolvency clause with automatic review after insolvency
This variation includes an automatic review provision.
Upon insolvency, this agreement will automatically be subject to review by both parties. The non-insolvent party will have the right to terminate the agreement following the review if the insolvency event is deemed to have a significant impact on performance. Any ongoing obligations may be suspended or adjusted based on the outcome of the review.
Termination for insolvency clause with indemnification for costs
This variation includes indemnification for costs related to insolvency.
The insolvent party agrees to indemnify the non-insolvent party for any costs incurred due to the insolvency event, including legal fees, administrative costs, and any penalties arising from the termination of this agreement. The non-insolvent party may recover these costs before or after the termination.
Termination for insolvency clause with obligation to notify creditors
This variation includes a requirement to notify creditors.
If either party becomes insolvent, they agree to promptly notify the other party in writing, as well as any relevant creditors. Such notification will include a description of the insolvency event and the impact it may have on the obligations under this agreement. The non-insolvent party may then terminate the agreement if the insolvency severely impacts performance.
Termination for insolvency clause with waiver of claims after termination
This variation includes a waiver of claims after termination.
Upon termination due to insolvency, the non-insolvent party waives any claims for damages or losses caused by the insolvency. However, the insolvent party will remain liable for any amounts owed prior to the insolvency event or termination.
Termination for insolvency clause with assets freeze provision
This variation includes the freezing of assets.
If a party becomes insolvent, the other party may immediately freeze any of the insolvent party's assets in connection with this agreement. The non-insolvent party has the right to terminate the agreement, and all further obligations will cease, with no penalty for termination.
Termination for insolvency clause with court-appointed receiver
This variation includes a receiver in insolvency.
If either party is placed under insolvency proceedings and a receiver, trustee, or similar official is appointed, the other party may terminate this agreement immediately. The insolvency party’s obligations under the agreement will cease, and the non-insolvent party will have no further liabilities.
Termination for insolvency clause with suspension of rights
This variation suspends rights during insolvency.
In the event of insolvency, the non-insolvent party has the right to suspend all rights and obligations under this agreement until further notice. If the insolvency persists or worsens, the agreement may be terminated without penalty.
Termination for insolvency clause with automatic contract dissolution
This variation provides for automatic dissolution.
If either party becomes insolvent, this agreement will automatically dissolve without the need for formal notification. The dissolution is effective immediately upon the insolvency event, and no further obligations will remain for either party.
Termination for insolvency clause with alternative solution provision
This variation offers an alternative solution before termination.
Upon insolvency, the non-insolvent party may opt to work with the insolvent party to find an alternative solution to continue performance under this agreement. If no viable solution is found within [specified number] days, the agreement may be terminated.
Termination for insolvency clause with performance bond requirement
This variation includes a performance bond.
In case of insolvency, the insolvent party agrees to provide a performance bond or other security as determined by the non-insolvent party. If the performance bond is not provided within [specified period], the agreement may be terminated immediately.
Termination for insolvency clause with effect on ongoing projects
This variation specifies the effect on ongoing projects.
If a party becomes insolvent, the other party may terminate this agreement with immediate effect. Any ongoing projects or obligations that were in progress before insolvency will be assessed, and both parties will cooperate to wind down or reassign responsibilities.
Termination for insolvency clause with special conditions for government contracts
This variation adds conditions for government contracts.
In the case of insolvency, and if either party is a government contractor or subcontractor, the affected party agrees to notify the government authorities as required by law. Both parties agree to terminate the agreement in accordance with government regulations governing such contracts.
Termination for insolvency clause with asset liquidation provision
This variation includes an asset liquidation provision.
If the insolvent party enters into liquidation, the non-insolvent party has the right to terminate this agreement. Any proceeds from the liquidation that are related to this agreement will be used to settle outstanding debts, and the non-insolvent party may recover any amounts due under the agreement.
Termination for insolvency clause with liability for termination fees
This variation includes liability for termination fees.
If a party becomes insolvent and the agreement is terminated as a result, the insolvent party will be liable for any termination fees or penalties incurred by the non-insolvent party. These fees will be due immediately upon termination.
Termination for insolvency clause with creditor claim handling
This variation includes creditor claim handling.
In the event of insolvency, both parties agree to handle any creditor claims arising from the insolvency promptly. The insolvent party will be responsible for all creditor claims up to the point of termination, while the non-insolvent party will work to mitigate any losses due to the insolvency.
Termination for insolvency clause with mutual decision for continuation
This variation involves mutual decision.
In the event of insolvency, the non-insolvent party may choose to terminate the agreement, or the parties may mutually decide to continue under modified terms. Any continuation will require both parties to agree on revised obligations, taking into account the insolvency situation.
Termination for insolvency clause with confidentiality obligations post-termination
This variation includes confidentiality obligations after termination.
Upon termination of this agreement due to insolvency, both parties agree to continue to honor their confidentiality obligations as outlined in the agreement. Any confidential information obtained during the term of the agreement must continue to be protected and not disclosed to third parties.
Termination for insolvency clause with option for renegotiation
This variation includes an option for renegotiation.
If either party becomes insolvent, the non-insolvent party has the option to renegotiate the terms of the agreement before termination. If a mutually agreeable solution cannot be reached, the agreement may be terminated with notice.
Termination for insolvency clause with liquidator appointment provision
This variation includes a provision for a liquidator appointment.
If the party becomes insolvent and a liquidator is appointed, the non-insolvent party may terminate this agreement immediately. Any rights or obligations of the insolvent party under this agreement will cease upon the appointment of the liquidator.
Termination for insolvency clause with notification to affiliates
This variation requires notification to affiliates.
If either party becomes insolvent, the affected party agrees to notify its affiliates within [specified number] days of the insolvency event. The non-insolvent party may then terminate this agreement after considering the impact of the insolvency on its affiliates.
Termination for insolvency clause with continued obligations on insolvency
This variation continues obligations after insolvency.
If a party becomes insolvent, the non-insolvent party may terminate this agreement, but the insolvent party will remain responsible for obligations incurred before insolvency. Any work or services provided up until the termination will be compensated as agreed upon prior to insolvency.
Termination for insolvency clause with duty to mitigate damages
This variation includes a duty to mitigate damages.
If a party becomes insolvent, the non-insolvent party may terminate the agreement. However, the non-insolvent party agrees to take reasonable steps to mitigate any damages incurred due to the termination caused by insolvency.
Termination for insolvency clause with assets valuation requirement
This variation includes a requirement for asset valuation.
If a party becomes insolvent, the non-insolvent party may terminate this agreement. The insolvent party agrees to provide a valuation of its assets within [specified period] after insolvency, which will be used to settle any outstanding obligations under the agreement.
Termination for insolvency clause with post-termination support
This variation includes post-termination support.
Upon insolvency and termination of this agreement, the insolvent party will provide reasonable support for the transition of services, including access to records and systems, for a period of [specified number] days to ensure minimal disruption.
Termination for insolvency clause with indemnity for continued performance
This variation includes indemnity for continued performance.
If a party becomes insolvent, the non-insolvent party may terminate the agreement. However, the insolvent party agrees to indemnify the non-insolvent party for any costs incurred to continue performance under the agreement prior to termination.
Termination for insolvency clause with protection of intellectual property rights
This variation addresses intellectual property rights protection.
In the event of insolvency, the non-insolvent party may terminate the agreement, but the intellectual property rights and any materials developed during the agreement will remain the sole property of the non-insolvent party, subject to any prior agreements or licenses in place.
Termination for insolvency clause with transition and handover provision
This variation includes a transition and handover provision.
If a party becomes insolvent and the agreement is terminated, the insolvent party agrees to cooperate in the handover of any ongoing obligations, work, or projects to the non-insolvent party. Both parties will work to ensure a smooth transition to minimize disruption.
Termination for insolvency clause with a right to renegotiate terms
This variation includes a right to renegotiate terms.
In the event of insolvency, the non-insolvent party may terminate the agreement or, at their discretion, enter into renegotiation to modify the terms of the agreement based on the insolvent party’s ability to perform under revised conditions.
Termination for insolvency clause with clear consequences for termination
This variation specifies the consequences of termination.
Upon termination due to insolvency, the insolvent party will be liable for any outstanding obligations, including unpaid invoices and penalties. The non-insolvent party may pursue legal remedies to recover costs and damages resulting from the insolvency and termination.
Termination for insolvency clause with right to suspend services
This variation grants the right to suspend services.
If either party becomes insolvent, the non-insolvent party may suspend services under this agreement until the insolvency is resolved or termination occurs. If the insolvency persists for [specified period], the non-insolvent party may terminate the agreement.
Termination for insolvency clause with settlement of outstanding debts
This variation includes the settlement of outstanding debts.
Upon insolvency, the insolvent party agrees to immediately settle any outstanding debts or financial obligations under this agreement. Failure to settle within [specified period] will entitle the non-insolvent party to terminate the agreement and seek recovery of the owed amounts.
Termination for insolvency clause with buyout provision
This variation includes a buyout provision.
If a party becomes insolvent, the non-insolvent party has the right to buy out the insolvent party’s interest in the agreement at fair market value. If the parties cannot agree on the value, an independent appraiser will be appointed to determine the buyout price.
Termination for insolvency clause with effect on ongoing liabilities
This variation addresses ongoing liabilities.
If the agreement is terminated due to insolvency, the insolvent party remains liable for any ongoing liabilities incurred before the termination. The non-insolvent party will not be responsible for fulfilling any obligations after the termination.
Termination for insolvency clause with transition period
This variation includes a transition period after insolvency.
In the event of insolvency, the agreement may be terminated, but both parties agree to a transition period of [specified period] to ensure proper winding down of obligations. During this period, both parties will continue to fulfill their obligations under the agreement until it is concluded.
Termination for insolvency clause with appointment of new manager
This variation involves appointing a new manager.
If the party becomes insolvent, the non-insolvent party may terminate this agreement or, at their discretion, appoint a new manager or representative to take over the performance of the agreement. The non-insolvent party will bear any costs associated with the appointment.
Termination for insolvency clause with right to renegotiate payment terms
This variation includes a right to renegotiate payment terms.
In the event of insolvency, the non-insolvent party may renegotiate the payment terms of the agreement with the insolvent party. If an agreement on revised payment terms cannot be reached, the non-insolvent party has the right to terminate the agreement.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.