This termination and release agreement is between
Under section
The parties therefore agree as follows:
1. TERMINATION.
Effective as of
2. MUTUAL RELEASE OF LIABILITY.
- (a) Release. Effective as of the Termination Date, each party hereby releases any claim it may have against the other party that arises out of the Agreement. Any obligations of either party that are expressly stated to survive expiration or termination of the Agreement are not released by this termination. Neither party's obligations under this agreement are released by this section.
(b) Limitations. Except as expressly provided in this section, the parties each hereby waive the benefit of the provisions of California Civil Code section 1542, and any similar or analogous statute from another state or federal jurisdiction. California Civil Code section 1542 provides: - A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
Each party understands that this statute gives it the right not to release existing claims of which it is not now aware, unless it voluntarily waives this right. With this knowledge, the parties nevertheless voluntarily choose to and do waive the rights described.
3. RESTRICTIVE COVENANTS.
- (a) Protection of Confidential Information. Each party has an ongoing duty to treat the other party's confidential information as confidential, and may not disclose that information to any third party or use it for any purpose other than to fulfill an outstanding obligation under the Agreement or this termination. Each party shall use due care and diligence to prevent any unauthorized use or disclosure of this information.
- (b) Nondisparagement. Neither party may engage in any form of conduct, or make any statements or representations, that disparage or otherwise harm the other party's reputation, goodwill, or commercial interests.
4. RETURN OF GOODS.
Within
5. COVENANT NOT TO SUE.
Each party hereby covenants to the other party that with respect to any claim or obligation released by this termination, it will not directly or indirectly encourage, solicit, or voluntarily assist or participate in any way in filing, reporting, or prosecution, by itself or any third party, of a suit, arbitration, mediation, or claim (including a third-party or derivative claim) against the other party relating to that released claim or obligation.
6. GOVERNING LAW.
- (a) Choice of Law. The laws of the state of
govern this agreement (without giving effect to its conflicts of law principles). - (b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in
, .
7. AMENDMENTS.
No amendment to this agreement will be effective unless it is in writing and signed by a party or its authorized representative.
8. COUNTERPARTS; ELECTRONIC SIGNATURES.
- (a) Counterparts. The parties may execute this agreement in any number of counterparts, each of which is an original but all of which constitute one and the same instrument.
- (b) Electronic Signatures. This agreement, agreements ancillary to this agreement, and related documents entered into in connection with this agreement are signed when a party's signature is delivered by facsimile, email, or other electronic medium. These signatures must be treated in all respects as having the same force and effect as original signatures.
9. SEVERABILITY.
If any provision contained in this agreement is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this agreement, but this agreement will be construed as if the invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated under this agreement to be unreasonable.
10. NOTICES.
- (a) Writing; Permitted Delivery Methods. Each party giving or making any notice, request, demand, or other communication required or permitted by this agreement shall give that notice in writing and use one of the following types of delivery, each of which is a writing for purposes of this agreement: personal delivery, mail (registered or certified mail, postage prepaid, return-receipt requested), nationally recognized overnight courier (fees prepaid), or email.
- (b) Addresses. A party shall address notices under this section to a party at the following addresses:
- If to
: , - If to
: , - (c) Effectiveness. A notice is effective only if the party giving notice complies with subsections (a) and (b) and if the recipient receives the notice.
11. WAIVER.
No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this agreement will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.
12. ENTIRE AGREEMENT.
This agreement, together with the Agreement, constitutes the final agreement of the parties. It is the complete and exclusive expression of the parties' agreement with respect to the subject matter of this agreement. All prior and contemporaneous communications, negotiations, and agreements between the parties relating to the subject matter of this agreement are expressly merged into and superseded by this agreement. The provisions of this agreement may not be explained, supplemented, or qualified by evidence of trade usage or a prior course of dealings. Neither party was induced to enter this agreement by, and neither party is relying on, any statement, representation, warranty, or agreement of the other party except those set forth expressly in this agreement. Except as set forth expressly in this agreement, there are no conditions precedent to this agreement's effectiveness.
13. HEADINGS.
The descriptive headings of the sections and subsections of this agreement are for convenience only, and do not affect this agreement's construction or interpretation.
14. EFFECTIVENESS.
This agreement will become effective when all parties have signed it. The date this agreement is signed by the last party to sign it (as indicated by the date associated with that party's signature) will be deemed the date of this agreement.
15. NECESSARY ACTS; FURTHER ASSURANCES.
Each party shall use all reasonable efforts to take, or cause to be taken, all actions necessary or desirable to consummate and make effective the transactions this agreement contemplates or to evidence or carry out the intent and purposes of this agreement.
[SIGNATURE PAGE FOLLOWS]
Each party is signing this termination on the date stated opposite that party's signature.
| Date:__________________________________ | By:____________________________________________________________ |
| Name: |
| Date:__________________________________ | By:____________________________________________________________ |
| Name: |
[PAGE BREAK HERE]
EXHIBIT A
How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.
Termination of agreement and release: How-to guide
The end of an agreement is as important as its beginning.
A change in the business climate or the parties’ goals may signal that it’s time to terminate the contract and release the parties from their duties. Such a release will give both parties peace of mind, discharging their obligations and leading to an amicable arrangement conclusion.
A well-drafted termination and release agreement is the definitive end of the parties’ commitments and can help prevent future misunderstandings and disputes.
Note that termination is not an end in itself. It may open avenues of discussion with the other party that might otherwise have been closed. You can review your mutual expectations and concerns, perhaps laying the groundwork for future agreements and interactions. Assessing the parties' performance under the contract will give you both a better understanding of what should be required on termination.
Points to remember while drafting a termination agreement
1. Review the agreement
Let each party examine the termination as well as the original agreement. By doing this, the chance of a claim that a party was unaware of any terms or how those would impact their rights or responsibilities will be lowered.
Both parties should carefully analyze the termination to ensure all key contract points have been covered. Being too inclusive is preferable to being too exclusive. Don't presume that specific clauses are accepted if something isn't explicitly stated in the writing.
2. Perform the duties until the termination is signed
Review the original agreement and draft a list of your obligations and rights. Take a moment to ensure that your interests have been satisfied.
Ensure both parties have performed all of their duties under the contract before signing a termination because the terms of your original agreement will still be in effect. Once the termination has been signed, the original agreement becomes void.
3. Sign the termination agreement
Make two copies of the termination agreement for both parties and sign them. Keep a copy of the signed termination with the original contract. Once the termination has been drafted and signed, it is the concluding part of the original agreement and should be treated accordingly.
Depending on the nature of its terms, you may decide to have your termination witnessed or notarized. This will limit later challenges to the validity of a party’s signature.
If the original agreement or the conditions of your termination are complicated, contact an attorney to help you draft a document that meets your needs.
Sections in a termination and release agreement
The following step-by-step guide will help you understand the terms and provisions of your termination and release agreement. Please review the template in its entirety before starting the process.
Introduction
In the first section, write information about the parties involved and the date from when the termination will be effective. The parties must be the same as those who signed the original agreement (unless one of the new signers is an agent of the same company that initially signed).
Recitals
This section identifies the existing agreement that’s being modified and explains where your right to terminate the document comes from. Please put in the effective date of the original agreement and the section number of the original agreement that allows you to terminate it. Ensure you have attached a signed copy of the original agreement to this document.
Termination
This part explains that both parties agree to terminate the agreement but acknowledge that if there are any ongoing obligations in the agreement (for example, a responsibility to ensure the other party’s confidential information stays confidential), those will survive the termination.
Mutual release of liability
This section discharges both parties of any liabilities that could arise from the original agreement.
In other words, you agree that you will not sue the other party for some unfinished payment obligations. This section has the most significant impact as you are eliminating your ability to claim that you are still owed something under the original agreement (and the same is true of the other party with respect to your obligations). Unfortunately, the inclusion of this provision will not prevent a party from arguing that enforceable promises still exist, but it can provide you some protection from these claims.
Return of goods
Although it may seem obvious that any of your goods in the other party's possession should be returned after the agreement is terminated, it may be less apparent to the other party.
This section indicates that each party must return the other’s merchandise, and they are responsible for the condition the goods are in when they are returned. It also allows the parties to determine a time frame within which the property must be sent back.
Confidential information
This clause serves mainly as a reminder to the parties that confidential information must remain confidential, even after the effective termination.
Review this section closely to ensure it provides sufficient security for your company and its proprietary information.
Non-disparagement
This section reflects the parties’ agreement that neither will say or do anything to damage the other’s commercial reputation.
Covenant not to sue
This section ensures that neither party will initiate or help others to initiate a lawsuit against the other based on claims released explicitly by the termination agreement. Again, the inclusion of this provision will not prevent all such lawsuits, but it can provide you some protection from those filings.
Governing law
The original agreement probably includes a choice-of-law provision that governs what laws will be used to interpret it.
If it does not, this section allows the parties to choose those laws.
Counterparts; electronic signatures
There are two explanations in this section:
- Even if the parties sign the termination in different locations or use electronic devices to transmit signatures, the separate pieces will be considered part of the same document.
- In a modern world where signing parties are often not in the same city—much less the same room—this provision ensures that business can be transacted efficiently without sacrificing the validity of the termination.
Severability
This section explains how it protects the terms of the termination as a whole, even if one part is later invalidated.
Entire agreement
In this section, the parties consent that the termination they’re signing (along with the original agreement) is “the agreement” about the issues involved. Unfortunately, the inclusion of this provision might not prevent a party from arguing that other enforceable promises exist, but it can provide you some protection from any potential claims.
Authority
This section guarantees that the parties signing the termination have the right and power to do so.
Headings
Here, you clarify that the headings in this section are meant to organize the document and should not be considered operational parts of the agreement.
Frequently asked questions
What's a termination of agreement and release?
Often, a lot of time and energy goes into crafting an agreement to begin a business relationship, but we don't always think about what we might need at the end.
Whatever the circumstances for parting ways, a termination and release, a contract termination agreement and release, or a mutual termination agreement is an agreement between the parties that ends the contract and releases people from their duties. And although no document can prevent lawsuits, it can help should things go sour.
What should be included in a termination agreement?
Here's the information you'll need to include in your termination of agreement and release:
- Who it's coming from: Determine if a business or individual is sending the document and have their name and contact information ready.
- Who it's going to: Know who this document is going to and have that individual or business name and contact information ready. If it's a business, know the business type (LLC, corporation, etc.).
- Which state will govern it: Specify a state so it's clear what laws apply to the document
- Subject matter: Have a summary of the nature of the original agreement ready, as well as any specifics within it about terminating the agreement
- Dates: Be clear about when the original contract will be terminated
- Things to return: If you or the other company needs to return items like laptops or merchandise, have that list ready (as well as a date when they will be returned)
Why is a termination and release agreement important?
As you tailor termination agreements to your specific needs, remember what you are trying to achieve: a profitable partnership, a relationship free of disputes, etc.
A well-written document should enhance the parties' understanding of their deal rather than obscure it. If any provision within your agreement is confusing, spend time trying to clarify its meaning.
A few hours spent improving your agreement is a valuable consideration and could save you weeks of problems in the future.
Other benefits of this document are that it can provide a clear and mutual understanding of the terms of the agreement, as well as help to set realistic expectations for both parties and answer questions at the outset of the contract. All of this, as well as implementing the tips provided, can help to minimize potential conflicts. But most importantly, if and when conflict or dispute does arise, you have taken a large step towards protecting your business with the help of an attorney.
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