What does this clause do?

It outlines the circumstances under which parties may end their legal relationship and withdraw from any obligations under the agreement.  Sometimes this is linked to the duration of the agreement, for example, if an agreement is for 12 months in duration it will terminate as soon as the 12 month period has passed.

However, if the agreement is not for a fixed term you will want to negotiate and decide how to exit the relationship.  Termination clauses are often on notice (for example the parties may cancel the agreement by giving each other 30 days notice in writing) or on breach (for example the parties can exit the relationship if the other party has committed a specific breach).

You may also find that some contracts are drafted in a one sided manner only allowing one party to cancel the agreement on notice.  Make sure that you discuss termination and record your decision in your agreement.

Real life example:

You are hired as a consultant for a six month period on a project for Engineering Co 5.  Your contract terminates automatically after six months but also provides for termination on notice of at least two weeks, during which you must render services and be paid for those services, or they may terminate the agreement if you are in breach.

Legislation:

The Consumer Protection Act has changed the common law around termination of contracts by providing a wide range of cooling off periods especially if the agreement was entered into after direct marketing and it provides relief (section 14) for getting out of fixed term contracts such as cellphone contracts by giving 20 business days notice.  A reasonable cancellation fee may be charged.\"""""\"

Kleva contract sample wording:

TERMINATION 

This Agreement shall automatically terminate on 1 July 2018.

1.1 Either party may also terminate this Agreement on two weeks’ written notice.  The Consultant shall be paid for all Services properly rendered to the termination date. 

1.2 Despite clause 1.1 above Engineering Co 5  may terminate this Agreement summarily for any reason valid in law or if the Consultant: 

1.2.1 is guilty of conduct which is likely to bring Engineering Co 5  into disrepute;  

1.2.2 is convicted of any offence involving dishonesty;  

1.2.3 is convicted, whether in the Republic of South Africa or elsewhere, of theft, fraud or forgery; 

1.2.4 is disqualified under any law from carrying on their profession. 

1.3 Should either party breach any term of this Agreement and not remedy the breach within 7 (seven) days after receiving written notice to do so, then the innocent Party may, without prejudice to any other rights which it has either in terms of this Agreement or at law, cancel this agreement and claim any damages, which may have arisen out of the breach…

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