Cure provisions: Overview, definition, and example
What are cure provisions?
Cure provisions are clauses in contracts that allow one party to correct or "cure" a failure to meet their obligations within a specified period, without the contract being terminated or penalties being imposed. These provisions typically come into play when one party breaches the contract, but the breach is not considered significant enough to immediately terminate the agreement. The party in breach is given the opportunity to fix the issue or make the situation right before more severe actions are taken.
In simpler terms, a cure provision is like a "grace period" for fixing mistakes before facing serious consequences, such as being sued or losing the contract.
Why are cure provisions important?
Cure provisions are important because they provide a chance to resolve issues without jumping to drastic measures, like ending the contract or seeking damages. They help maintain business relationships and offer flexibility by allowing minor issues to be corrected without disrupting the overall contract. For businesses, this provision helps protect against potential contract disputes and provides a way to remedy mistakes in a timely manner.
For SMB owners, having cure provisions in place ensures that both you and your partners or clients have a fair opportunity to fix problems, avoiding unnecessary penalties or lawsuits. It helps maintain positive working relationships, even when things go wrong.
Understanding cure provisions through an example
Imagine you’re a contractor building a new office for a client. The contract includes a cure provision stating that if the construction is delayed, you have 10 days to fix the issue before the client can terminate the agreement. During the build, you miss a deadline, but instead of terminating the contract immediately, your client gives you the 10-day period to catch up on the work. You complete the task within that time, and the contract remains in effect without any penalties.
In another scenario, suppose a business owner enters into an agreement to deliver goods to a supplier by a certain date, but the shipment is delayed due to an unexpected issue. If the contract has a cure provision, the business owner would have a set period (for example, 15 days) to resolve the delay before the supplier can terminate the contract or demand compensation.
Example of a cure provision clause
Here’s how a cure provision clause might look in a contract:
“In the event of a breach of this Agreement by either Party, the Party in breach shall have [insert number of days] days to cure such breach. If the breach is not cured within this time frame, the non-breaching Party shall have the right to terminate this Agreement and seek any available remedies, including damages.”
Conclusion
Cure provisions are essential in providing a second chance for parties to resolve issues in a contract before taking more severe actions. For SMB owners, understanding and including cure provisions in your contracts can help prevent unnecessary disputes and create more flexible and cooperative business relationships.
By using cure provisions, you can manage mistakes or delays in a way that maintains the business relationship and minimizes the risk of contract termination or legal action. Whether you're working with clients, suppliers, or partners, a well-crafted cure provision can be a valuable tool for resolving issues efficiently and fairly.
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.