When contracts terminate, the parties’ primary legal obligations under the contract end. They are no longer legally required to perform them.
Survival of Terms Clauses can change that.
Survival of Terms Clauses (or "Survival Clause" for short) expressly set out the legal obligations which the parties intend to apply after termination.
Commercial contracts are likely to contain legal obligations - such as confidentiality clauses – which are intended to continue after the contract has ended. These continuing legal obligations are technically known as “secondary obligations”.
They do not end with the contract.
The usual rule applied in the absence of a Survival of Terms Clause is that the provisions which may reasonably be expected to continue after the contract ends, continue. For instance, if a contract contains restrictive covenants with post-termination effect, they continue in force after termination as a matter of course.
Consistent with the principle of freedom of contract, contracting parties are also entitled to specify which clauses they wish to continue in force post termination.
That is the role that survival of terms clauses perform.
Example: Survival of Terms Clause
Broadly there are two types:
The type which is inserted into the context of another clause, such as:
15.X The provisions of this Clause shall continue to apply notwithstanding the termination or expiry of this Agreement for any reason.”
The other type is a standalone clause. It is often headed “Consequences of Termination”:
The following provisions shall continue in force after termination [clause A: Indemnities, clause B: Limitations of Liability, clause C: Confidentiality], and any other clause required to give effect to the intention of the parties shall continue in effect and be binding upon the parties.
If Survival of Terms clauses are made to apply to primarily obligations set out under the contract, it can create real confusion as to what has been agreed to apply post termination.
Commercial Contract Solicitors
We help our SMEs with business contracts and straightening up contract clauses so that they have the legal effect that they want them to.