Term and termination: Overview, definition, and example
What is term and termination?
Term and termination refers to the part of a contract that explains how long the agreement will last and how it can end. “Term” means the duration of the contract — when it starts and when it ends. “Termination” covers the ways either party can end the agreement early, and under what conditions.
Why is term and termination important?
This section sets expectations for how long a business relationship will last and protects both parties if things change. For example, a service provider might want a long-term contract for stability, while the client might want the option to leave early if they’re unhappy. Without clear termination rights, ending a contract early can lead to legal or financial risk.
Understanding term and termination through an example
Here’s how a term and termination clause might work in real life. ClearTech Solutions signs a 12-month contract with Northside Logistics to provide IT support. The contract says it renews automatically unless either party gives 30 days’ notice. It also allows termination with 15 days' notice if either side breaches the contract and doesn’t fix it.
Midway through the year, ClearTech stops responding to support requests. Northside sends a written warning, and when nothing changes after 15 days, they terminate the agreement. Because the termination terms were clearly laid out, the process is smooth and legally sound.
Example of a term and termination clause
Here’s how an example term and termination clause may look like in a contract:
This agreement begins on [Start Date] and continues for an initial period of twelve (12) months ("Initial Term"). After the Initial Term, the agreement will automatically renew for successive one-year periods unless either party provides written notice of non-renewal at least thirty (30) days before the end of the current term.
Either party may terminate this agreement with immediate effect if the other party materially breaches any obligation under this agreement and fails to remedy the breach within fifteen (15) days after receiving written notice of the breach.
Conclusion
Term and termination clauses give structure to the business relationship — defining how long it lasts and how either side can exit. Clear terms prevent confusion, reduce legal risk, and give both parties more control. If you're reviewing a contract, this is one of the first sections to check.
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.