Things you need to know about Termination Agreement.
1. What is a Termination Agreement?
A Termination Agreement is a formal and written document showing that all the parties have mutually agreed to cancel the agreement or contract and the date the termination will be effective.
2. When do you need a Termination Agreement?
A Termination Agreement is needed if the parties will mutually agree to officially terminate their agreement or contract. The document serves as written proof of the parties’ clear intent to terminate the agreement.
Be sure to check your agreement if it contains any procedure and/or requirement that must be satisfied before the agreement can be validly terminated. For example, certain agreements may require the termination agreement to be executed within a certain period of time prior to the intended date of termination (i.e. thirty (30) days prior to the intended date of termination). If such procedure and/or requirements exist in your agreement, be sure to follow them.
3. How can a Termination Agreement protect you?
A Termination Agreement helps the parties by creating a record that they mutually agreed to terminate the agreement and when the termination will be effective. This is helpful if a party later on disowns any knowledge of the termination, particularly if a case is filed in court.
The Termination Agreement can also help preserve the business relationship because the parties are upfront with each other about the termination. The letter also serves as an opportunity to cut the business relationship on good terms and with courtesy to the other party.
4. What information do you need to create the Termination Agreement?
To create your Termination Agreement you’ll need the following minimum information:
- The type of parties making the document (i.e. individual or corporation) as well as their name and details (i.e. address, position within the corporation)
- The details of the agreement to be terminated (i.e. title and date executed)
- When the termination will be effective