Contract Matters…The Termination Clause: Mapping the Exit Strategy

Often times, business owners are presented with seemingly golden opportunities that they cannot pass up. They find themselves in a crunch to get a deal done and either sign an agreement that has not been reviewed by legal counsel or pull a boilerplate agreement from the web and present it to the other party. We have discussed some of the dangers in these risky behaviors before. Today, let’s talk about the dangers of a bad termination clause.

When it comes to termination clauses, we have seen business owners make these common mistakes: either signing an agreement without a termination clause; signing an agreement with a clause that does not give an opportunity to terminate on terms advantageous to the business; or signing an agreement without understanding what actually does- or does not- trigger termination. We have seen these situations in a wide range of contractual arrangements- consultant agreements, vendor/supplier agreements and much more.

Why is the termination clause so important? Well, for various reasons. One common scenario is that things go terribly wrong. Another case we come across is the case of good business sense. Not every business relationship goes sour because someone did something wrong. Sometimes, circumstances just change and arrangements do not work anymore. Simply put, terminating a contract is sometimes a good or necessary business decision. You want to make sure that you have the ability to get out of an agreement in case this happens. On the other hand, you also want to be sure you are protected from having the plug pulled on you at a moment’s notice- without adequate time to prepare your business for any adjustments.

There are several other elements to termination clauses that are important. Contact C&G to assist you today!!

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