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Ending the contract

Termination for cause clause: meaning and sample wording

A termination for cause clause lets a party end the contract when the other party commits a material breach and does not fix it in time, or becomes insolvent.

When to use it

Every contract with ongoing obligations should have one, so both sides know exactly when a problem is serious enough to walk away.

Sample termination for cause clause

Either party may terminate this Agreement with immediate effect by giving written notice to the other party if:

(a) the other party commits a material breach of this Agreement that is not capable of remedy, or that is capable of remedy but is not remedied within thirty (30) days after the other party receives written notice identifying the breach and requiring it to be remedied; or

(b) the other party becomes insolvent, makes any arrangement with its creditors, has a receiver, administrator or liquidator appointed over any of its assets, or ceases to carry on business.

What to check

  • Cure periodFourteen to thirty days is typical. A breach notice should identify the breach and say it must be fixed, or the cure period may never start.
  • What is "material"?Courts decide based on the whole contract. If some breaches should always justify termination, such as a confidentiality breach or non-payment, list them.
  • InsolvencyInsolvency laws in some countries, including the US and the UK, restrict terminating supply contracts because the customer has entered an insolvency process. The clause may not be enforceable in every case.
  • Follow the notice clauseTerminations that are sent the wrong way or to the wrong address are a common source of disputes.

Make the variable parts fill themselves in

In a Word template, replace the details that change with {tags} and wrap optional wording in a section. Clausery turns them into questions, so each document only includes the parts that apply:

Either party may terminate this Agreement immediately by written notice if the other party commits a material breach that is not remedied within {cure_days} days of written notice{#include_insolvency_termination}, or if the other party becomes insolvent{/include_insolvency_termination}.

Paste this into your own template, then check it with the free template tag checker or read the template syntax.

Questions

What counts as a material breach?

A breach serious enough to substantially deprive the other party of what it bargained for. Late payment of a single small invoice usually is not; a failure to deliver the core service usually is.

What is a cure period?

The time the breaching party has, after receiving notice, to fix the breach before the other party can terminate.

Can I use this sample wording as it is?

It is a general starting point. Contract law differs between countries and states, and the right wording depends on the deal, so have it reviewed before you rely on it.

Free templates that use it

Related clauses

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This page is general information, not legal advice. Laws differ between countries and states; have wording reviewed for your situation before you rely on it.