Want to avoid a future lawsuit about your contract?  Make sure it has a clear, reasonable termination clause.  Lawsuits are, unfortunately, a common outcome when the parties to a contract don’t have any other way to get out of a contract they’re unhappy with, or when they don’t agree on who gets paid for what when the contract ends. 

Any termination clause should answer the following questions:

  • When may the contract be terminated? 
  • Can both sides terminate?
  • How, by when and to whom must notice be given?  For example, is e-mail an acceptable way to give notice? (We don’t recommend e-mail as the sole way to give notice – mail to an address listed in the contract is a good practice)
  • What payment is due in the event of termination?
  • What performance – if any — is due between the date of notice and the termination?

Look for more tips in future Contracts Competence columns.  If you have questions about termination clauses, or want help drafting or reviewing a contract, please contact our Business Law Group partner, David A. Closson at [email protected].

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