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When we are looking to sign a contract, it is easy to become lost in the business details to ensure that the key contract terms reflect business discussions and expectations.

Although it is important to ensure that the key contract terms are accurate as you enter into a new contractual relationship, what happens if things do not work out as planned after you have signed on the dotted line? Do you know where the exits are in the contract if you need to terminate and get out of the agreement?

An important section of the contract that can be overlooked is the termination provision. A termination clause sets out different scenarios of when the parties may end their legal relationship and stop fulfilling their obligations under the agreement. The scenarios can be crafted creatively to cover or offset certain risks if the agreement is indeed terminated.

For example, one party who is investing a lot of money early in the relationship may only allow the other party to terminate the contract at will after a certain period of time has passed so that the investing party has sufficient time to recoup their investment before the agreement is terminated at will. Another example is to impose a longer termination notice requirement on the terminating party so that the non-terminating party has enough time to get their operations in order by the time the agreement ends.

If you have any concerns of getting out of a contract or if you are contemplating entering into a new contract and need help in navigating the exit signs, we are here to assist and happy to answer any questions you may have.

Michelle Eames, LLB, LLM