Termination Clause
Definition
A termination clause sets out the conditions under which a contract may be terminated before its expiration date. It details the reasons that justify termination, the notice period required, and any associated penalties or compensation.
Examples of termination clauses in contracts
Employment Contracts: In an employment agreement, a termination clause may allow the employer to terminate the employee for cause (e.g., misconduct or poor performance) or without cause, often with notice or severance pay.
Service Agreements: A company may have a termination clause allowing it to end a contract with a service provider if the provider fails to meet performance standards. The company would typically need to provide written notice before termination.
Termination clauses provide clarity on how to exit contracts without breaching the terms.
