Effect of termination survival: Overview, definition, and example
What is the effect of termination survival?
The effect of termination survival refers to the provisions in a contract that remain in effect after the contract is terminated or expires. Even if the contract is no longer active, certain rights, obligations, or conditions may continue to apply, typically to protect both parties' interests after the termination of the agreement. These surviving provisions often include confidentiality obligations, indemnification clauses, dispute resolution processes, and any other terms that are necessary to ensure fair resolution of matters post-termination.
For example, a contract may include terms that survive termination, such as a provision requiring the returning of confidential information, or a provision that ensures the resolution of any ongoing disputes even after the agreement is no longer active.
Why is the effect of termination survival important?
The effect of termination survival is important because it provides clarity about which responsibilities, rights, and obligations extend beyond the end of the contract. Without clear survival clauses, both parties could be left uncertain about their responsibilities once the contract is terminated.
For businesses, this concept ensures that key protections, such as confidentiality and indemnification, remain in place even after the business relationship has ended. It also helps manage risks by ensuring that any claims arising from actions during the contract term are still addressed. For individuals, understanding what survives the termination of a contract ensures that they are aware of any ongoing duties or rights.
Understanding the effect of termination survival through an example
Imagine a software company entering into a licensing agreement with a client for a one-year term. The contract includes a survival clause stating that the confidentiality obligations, payment obligations for services rendered before termination, and any dispute resolution procedures will survive termination. This means that even if the agreement ends, the client is still required to keep proprietary information confidential, and any disputes arising before termination will still be handled according to the contract terms.
In another example, a service provider may have a contract that expires, but there’s a survival clause specifying that any indemnification obligations (such as covering damages for actions taken during the contract period) will continue after the contract ends. This ensures that the service provider remains liable for any claims that arise post-termination based on their actions while the agreement was in effect.
An example of an effect of termination survival clause
Here’s how an effect of termination survival clause might look in a contract:
“The Parties agree that the following provisions shall survive the termination or expiration of this Agreement: confidentiality obligations under Section [Insert Section Number], indemnification obligations under Section [Insert Section Number], and any claims or disputes arising prior to the termination of the Agreement. All other provisions shall cease to have effect upon termination, except as necessary for the enforcement of the surviving provisions.”
Conclusion
The effect of termination survival ensures that certain provisions of a contract continue to be enforceable even after the contract is terminated. This is crucial for protecting both parties' interests, ensuring that important obligations such as confidentiality, indemnification, and dispute resolution continue to apply even once the agreement is no longer in force. By including clear survival clauses, parties can avoid ambiguity and ensure that their legal rights and responsibilities remain intact post-termination.
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.