consequences of termination clause (post-termination rights)

 

Consequences of Termination Clause

In common with Survival of Terms clauses, Consequences of Termination Clauses can be included in contracts to state the rights which are intended to continue at termination, or end.

Survival of Terms clauses often form part of Consequences of Term Clauses, when a Consequences of Term Clause is used.

Consequences of Termination Clauses are useful when more tasks need to be completed after termination. More sophisticated types of post-contractual obligations are gathered together in one place in the agreement.

Consequences of Termination Clauses can also be used to:

1. make clear what rights end at termination, such as:
   • intellectual property licences
   • rights to use software as a service
2. specify tapering off rights, such as:
   • a limited period to sell goods remaining in stock of a distributor at the time of termination
   • complete help desk or service desk tickets which were in motion at the time of termination
   • obligations to cooperate to hand-over management of services to a new service provider
   • transfer of data or return of data

3. create new rights and obligations, such as:
   • rights to buy back stock which has been sold to a distributor by a supplier for a fixed time
   • create rights to use intellectual property into the future indefinitely

It’s a common mistake to create fresh new legal rights at termination that do not have a definite end date. It defeats the purpose of ending the contract and winding down the relationship between the parties.

It can also create mind-blowing legal complexity, because the contract is meant to end at termination. Not continue forever. Some obligations might, such as confidentiality, most won't.

Example: Consequences of Termination Clause

1. Upon termination of this agreement, howsoever caused:
   1. All licences and permissions granted in this agreement shall terminate;
   2. […]
   3. The following licences shall be granted, on the following terms:
      1. […]
2. Each of the parties will promptly return to the other the Confidential Information of the other.
3. [Cumulative Rights Clause]

Related:

• Boilerplate Clauses
• Contractual Lien
• Force Majeure Clause
• Termination and Break Clauses