Business professionals negotiating contracts often focus on specific terms. They prioritize delivery timelines or standards for services provided. They want to ensure the protection of trade secrets and intellectual property while affirming the obligations they have to the other party.
In some cases, they may focus so much on the working relationship that they fail to properly plan for the end of the business agreement. Strong contracts require careful planning and custom terms. In addition to clearly addressing the obligations of each party, those negotiating contracts also need to include terms that address what happens at the end of the working agreement between the parties.
How can contracts address the end of a working relationship to protect a business?
Clarifying when the agreement ends
Each business relationship and contract has unique parameters. Perhaps a business wants to indefinitely lock in vendor services for weekly deliveries of specialty produce. The contract may potentially persist indefinitely in that arrangement.
Other times, the contract is likely to last a set amount of time. The company may require one year of accounting and payroll services or support for the duration of a single construction project. Contracts should include information about the duration of the agreement and when it might end on its own.
It may also be necessary to include terms regarding when and why either party can cancel the agreement before the scheduled end of the business contract. In some cases, the agreement might include provisions that require an attempt at alternative dispute resolution before either party prematurely cancels the agreement or initiates contract litigation.
Establishing terms for contract cancellation
Depending on the nature of the contract, it may be necessary for either party to provide a specific amount of advance notice regarding an intended cancellation. Requiring a 30-day notice is common. Requesting written notice of a pending termination can also be helpful.
Businesses might also impose certain penalties for early cancellations or the failure to fulfill cancellation terms. The contract might even include guidelines for renegotiating, renewing or extending the agreement. In some cases, the contract may include provisions that allow certain aspects of the agreement, such as a restrictive covenant, to remain in effect even after the working relationship between the parties ends.
Every working relationship has unique issues that may influence the best terms to add to a contract. Discussing company objectives and sources of exposure with a skilled legal team can help those establishing, renewing or canceling a contract ensure optimal organizational protection throughout that process.
