Ending a commercial relationship? Use this free termination agreement template to make sure you end the original contract on good terms.
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Ending a commercial relationship can be tough and there's a lot that needs to be ironed out before you do. This is where a termination agreement comes into play.
Discover how a termination agreement works and what it covers in this guide.
We've also added a free termination agreement template to use as a starting point. This could be used as a basis for a lease termination agreement or for the early termination of a lease agreement by a tenant.
A termination agreement, also known as a contract termination agreement or a mutual termination agreement, is a formal document that outlines the terms and conditions under which a contract between two parties will be terminated.
It is used to end a contractual relationship while minimizing potential legal disputes and maintaining a professional relationship between the parties.
The primary purpose of a termination agreement is to provide a clear and mutually agreed-upon roadmap for ending a contractual relationship.
It outlines the rights, responsibilities and obligations of both parties during the termination process. This agreement is designed to minimize potential disagreements, ensure a smooth transition, and maintain a professional relationship between both parties.
The responsibility of managing termination agreements typically falls on the party initiating the contract termination.
However, it's beneficial for both parties to maintain copies of the agreement and to revisit it regularly to stay compliant with terms agreed.
The contents of a termination agreement can vary depending on the nature of the original contract and the reasons for termination. However, most termination agreements will have the following main components:
Creating a termination agreement typically involves several steps:
The first step in creating a termination agreement is recognizing the need to end a contract. This could be due to a variety of reasons such as:
It's crucial to review the original contract before drafting a termination agreement. This is because the original contract often contains clauses that outline the process and conditions for termination, so these need to reflect one another.
The next step is to draft the termination agreement itself. This document should include key details such as the parties involved, the date of termination, the reason for termination, any remaining obligations and a release of liability.
It's important to be as concise and specific as possible to avoid any potential misunderstandings or disputes.
Once the termination agreement is drafted, both parties should review it carefully. If there are any disagreements over the terms of the agreement, the parties will need to negotiate until they reach a mutual understanding.
Once both parties agree to the terms of the termination agreement, they will need to sign it. This can be done traditionally with pen and paper, or digitally using an eSignature tool.
After the termination agreement is signed, both parties will need to fulfill any remaining obligations outlined in the agreement. This could involve completing any outstanding work, making final payments, and returning any property or materials belonging to the company.
Despite their importance, managing termination agreements can present several challenges:
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A contract management tool like Juro automates up to 75% of routine admin and helps you agree contracts 10x faster. Juro can help you to manage your termination agreements using the features below:
If managing contracts (like termination agreements) is painful for your business, it's time to consider Juro's all-in-one contract tool.
Juro makes it easy for businesses managing contracts to streamline the contract lifecycle and reduce friction.
To find out more, hit the button below for your personalized demo.
A termination agreement is a contract two parties sign to end an existing contract between them by mutual agreement. It records the date the original contract ends and what each side still has to do, such as making final payments or returning materials. Businesses use it to close a commercial relationship cleanly instead of leaving open questions about what is still owed.
Not always. If you're ending the contract under its own termination clause, a written notice that follows the clause is often enough. A termination agreement is most useful when both sides want to end early or on different terms, or want to settle what is still owed before they part ways.
This template ends a commercial contract between businesses, such as a supply or services deal. An employment termination agreement ends a job, so it deals with issues like severance pay and the employee's release of claims, which employment law often regulates. If the person leaving is your employee, use the employment version.
List the duties that survive the end date so neither side assumes they've lapsed, such as confidentiality, payment for work already done, the return of materials and any warranties still running. Disputes often start when the original contract says some clauses survive termination and the termination agreement says nothing about them. Check the original contract's survival clause and make the two documents match.
It's a sound starting point, but check it against the termination clause in your original contract and adjust the remaining obligations to fit the deal you're ending. For specific legal advice on your contract templates, consult an attorney.
Keep one termination agreement template in Juro and create each agreement from it, with the commercial or operations team filling in the original contract and the end date. When legal changes the standard wording, such as the release or confidentiality terms, every new agreement uses the updated version. Signed termination agreements sit in the same repository as the contracts they end, so you can search them for end dates and any obligations that run on afterward.
Yes. With Operator in Juro, you can get a new termination agreement template drafted from your existing contracts, reflecting your drafting style and the positions you usually take on releases and post-termination obligations. Legal reviews and approves the first draft before anyone uses it, so it stays within your risk appetite.
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