Term & Termination
Contract Type:
Generic Contract
Jurisdiction:
1. This Contract shall come into force on [DATE] and shall continue for an initial period of [TIME PERIOD] (“Initial Term”). 2. Either party may terminate this Contract by giving [NOTICE PERIOD] written notice to the other party. 3. Either party may terminate this Contract with immediate effect by giving written notice to the other party if: (a) the other party commits a material breach of any term of this Contract and (if such a breach is remediable) fails to remedy that breach within 30 days of that party being notified in writing of the breach; or (b) the other party suspends, or threatens to suspend, payment of its debts or is unable to pay its debts as they fall due or admits inability to pay its debts or is deemed unable to pay its debts; or (c) the other party commences negotiations with all or any class of its creditors with a view to rescheduling any of its debts, or makes a proposal for or enters into any compromise or arrangement with its creditors. 4. Termination of this Contract shall not affect any rights, remedies, obligations or liabilities of the parties that have accrued up to the date of termination. 5. Any provision of this Contract that expressly or by implication is intended to come into or continue in force on or after termination shall remain in full force and effect.
Explanation
Here is a plain English explanation of the suggested Term & Termination clause:
- It sets an initial contract term, starting on a specified date and lasting for a defined period.
- Either party can terminate early by giving written notice of a specified notice period.
- The contract can be terminated immediately by either party if the other:
1) Commits a serious breach of contract terms and fails to fix it within 30 days of being notified.
2) Becomes unable to pay debts or insolvent.
3) Starts negotiating with creditors due to financial difficulties.
- Rights and obligations existing before termination still apply.
- Any terms intended to apply after termination will remain in force.
In summary, this clause allows the contract to be terminated earlier than the initial term either with notice or for specified breaches/insolvency.
It aims to provide an exit while protecting parties' accrued rights and ongoing intended obligations.
Early English common law viewed many contracts as perpetual, only ending upon full completion. But courts eventually allowed parties to expressly limit agreement durations.
Still, terminating contracts prior to their expiration date remained difficult.
By the 19th century, clauses emerged allowing termination if certain conditions were met, like non-payment. But onerous termination processes hindered flexibility. During this period, courts upheld "pay or play" clauses requiring payment even if contracts terminated prematurely.
Standardized termination clauses proliferated in the 20th century along with defined contract term lengths. Businesses sought easier exits from commitments if relationships or economics soured. Formats like requiring notice to terminate became common.
More recently, termination clauses tend to permit quick exit upon major breaches like insolvency. Business norms favor reasonable escape hatches over "locked in" contracts. Boilerplate termination templates enable consistency across contracts.
Today, thoughtful termination provisions allowing flexibility balanced with protecting parties’ expectations are seen as vital in contracts.
Clear termination processes provide orderly transitions rather than abrupt ruptures in commercial relationships. Refined modern termination clauses keep pace with business needs.
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