Clause #8 – How contracts can be terminated

By Kimberlee Carstensen on 29 April 2026

Most commercial contracts include termination clauses that set out how the contract can be ended, either for convenience (without cause), or due to breach, insolvency or other trigger events (with cause). These clauses must be followed carefully as terminating in the wrong way, or at the wrong time, can invalidate the termination and expose a business to contractual claims.

Termination for convenience

Termination for convenience is often included as a way for parties to walk away from a contract without needing to prove fault. This right can be drafted in a way which allows either party to end the agreement by providing the other party with notice, the amount of which is often subject to negotiation and can depend on the type of services provided.

Considerations:

Customer - should assess whether it has a right to exit that works for it and, if the supplier also has a right to terminate, whether the supplier’s notice period is long enough to allow for an orderly transition to an alternative supplier, particularly for business‑critical services.

Provider - may seek to limit or exclude customer termination for convenience to support revenue forecasting and commercial stability, for example, by only allowing such termination at renewal or after a minimum period of time.

Termination for breach

Contracts commonly allow termination for breach or “cause”, such as insolvency, material breach, failure to pay, failure to deliver services, or breaches of security or data protection obligations.

These clauses often distinguish between:

• Remediable breaches, where the breaching party has a defined period to fix the issue; and
• Irremediable breaches, where the contract can be terminated immediately.

Certain events such as insolvency or serious data protection failures are frequently treated as grounds for immediate termination.

Considerations:

Customers and providers should understand their key obligations and ensure they’re complied with to reduce the risk of termination being threatened or triggered. If something does go wrong, notice periods and any remediation or dispute resolution procedure should be followed to avoid being accused of wrongful termination.

Change of control

Contracts often contain a clause which allows a party to terminate when the other party undergoes a change of ownership or management (“Change of control”). Although triggered by a sale, these clauses aren’t only significant during a sale; rather small businesses or startups should be cautious not to overlook them when negotiating their first customer contracts. These clauses can cause issues later when the business starts looking for investment, a sale or even when considering management buyout.

If you’re a seller and your customer contract has such a clause, this will probably be flagged during a corporate due diligence, and the buyer will generally require that you seek consent or approval from the customer prior to the completion of a transaction. While this is often straightforward, there is a risk that - if a lot of revenue is tied up in contracts with rights to terminate for change of control - it will impact on the structure of a deal.

Considerations:

Consider if a change of control provision protects a legitimate concern; if not try to remove it or limit it to cover specific concerns, e.g. acquisition by a competitor or a change that causes regulatory issues.

Consequences of termination

What obligations end on termination

Termination usually ends future performance, but obligations that have already arisen, for example, such as unpaid invoices or liability for earlier failures do not simply fall away post-termination.

What obligations survive termination

Certain terms of the contract often continue after termination, including confidentiality obligations, data protection obligations, limitations of liability and dispute resolution. You should ensure you’re familiar with which obligations continue to apply.

In addition, there may be specific practical actions required on termination, such as to return information/materials, provide transitional support, or implement an exit plan. These should be checked carefully to ensure they are appropriate and can be complied with on termination.

Financial consequences

If a contract is terminated because one party is at fault, the innocent party may be entitled to compensation for losses suffered. Please see our clause guide relating to limitations on liability.

Key Takeaway

Termination rights are about more than ending a contract, they are a key risk‑management tool. Businesses should ensure termination clauses reflect the nature of the services, protect continuity of operations, and allow flexibility for future growth or transactions. Reviewing these provisions early can help avoid disruption, unexpected liability and value erosion later on.

How we can help

We specialise in helping companies do business effectively and efficiently. One aspect of that is our in-depth knowledge of negotiating commercial contracts.

If you’d like to discuss your commercial contracts, and how we can help, then please get in touch on +44 (0) 117 928 1910 or email ian.grimley@roxburghmilkins.com.