Termination by either party: Overview, definition, and example
What is termination by either party?
Termination by either party refers to a contract provision that allows both parties to end an agreement under specific conditions. This clause typically outlines the notice period, reasons for termination, and any obligations that must be fulfilled before the contract ends.
For example, a business may have a service agreement that either party can terminate with 30 days' written notice if they no longer wish to continue the relationship.
Why is termination by either party important?
This clause is important because it provides flexibility and a clear exit strategy for both parties. Without a well-defined termination provision, one party might be forced to stay in an unfavorable agreement or face legal disputes over ending the contract.
For businesses, a termination by either party clause ensures that they can adapt to changing circumstances while maintaining legal protections and avoiding unexpected contract breaches.
Understanding termination by either party through an example
Imagine a marketing agency enters into a retainer agreement with a client. The contract includes a termination by either party clause, allowing either the agency or the client to end the agreement with 30 days' written notice. This ensures that both parties have an exit option if the partnership is no longer beneficial.
In another scenario, a software licensing agreement states that either party may terminate the contract with 60 days' notice if the other party fails to meet performance standards or wishes to end the business relationship for convenience. This provides certainty and fairness in case the contract is no longer viable.
An example of a termination by either party clause
Here’s how a termination by either party clause might appear in an agreement:
“Either Party may terminate this Agreement upon providing [X] days' written notice to the other Party. Upon termination, both Parties shall fulfill any outstanding obligations incurred prior to the termination date. This termination shall not relieve either Party from obligations that, by their nature, survive termination.”
Conclusion
A termination by either party clause provides a structured and fair way for businesses to end agreements when necessary. It ensures flexibility, transparency, and legal clarity, reducing the risk of disputes or unexpected contract breaches.
By including a termination by either party clause in contracts, businesses can protect their interests, define a clear notice period, and maintain professional and legal safeguards when exiting agreements.
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.