A termination clause defines how and when a contract can be ended by either party. Understanding these terms is crucial - they determine your ability to exit a bad situation and what happens when you do.
“Either party may terminate this Agreement for convenience upon sixty (60) days' prior written notice. Company may terminate immediately for cause upon material breach by Contractor. Upon termination, Contractor shall return all Company property and deliver all work product completed to date, and Company shall pay Contractor for services rendered through the termination date.”
Either side can end the contract with 60 days notice for any reason. The company can also end it immediately if you breach the contract. When it ends, you must return everything and hand over your work, and they'll pay you for work done so far.
One-sided termination rights (only one party can terminate for convenience)
Short or no notice periods for termination
Unclear definition of 'material breach' that triggers termination for cause
Forfeiture of unpaid fees upon termination
Ongoing obligations that survive termination indefinitely
Termination for cause requires wrongdoing (breach, misconduct). Termination for convenience lets you exit for any reason with proper notice. For-cause usually allows immediate termination; for-convenience requires a notice period.
Typically, you should be paid for work completed before termination. Review whether the clause specifies payment for work in progress, return of deposits, or forfeiture of unpaid amounts. Termination for cause may have different payment terms.
Common surviving obligations include confidentiality, indemnification, non-compete restrictions, and IP assignment. These continue even after the contract ends. Review what survives and for how long.
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An indemnification clause requires one party to compensate the other for certain losses, damages, or legal costs. These clauses can expose you to significant financial risk if not carefully reviewed.
A confidentiality clause (or NDA - Non-Disclosure Agreement) protects sensitive business information from being shared with third parties. These clauses are essential but can be overly broad or perpetual.
An intellectual property clause determines who owns the work, inventions, and creative output produced during a business relationship. These clauses can have lasting impacts on your ability to use your own work.