Commercial contracts generally terminate when the term expires or when both parties have fully performed their obligations. In these situations, no additional agreement is necessary to memorialize the termination.
In certain cases, however, the parties may wish to terminate the agreement before the ordinary termination date. This may occur if the deal is unfavorable to both parties or one party fails to perform both parties seek a clean break. In these instances, the parties should sign a simple termination agreement that includes:
- the termination date;
- any special conditions of termination (e.g., surviving obligations); and
- a release of claims.
Save this termination agreement in your files to close the chapter on the deal and make a note of any surviving obligations and action items.