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Termination: Definition, Example and Related Terms

What is Termination ?

Termination is the actio nof bringing a contract to an end.

Contracts are like promises, but they are legally binding, which means the law can enforce them. When a contract is terminated, it means that the parties involved are no longer obligated to fulfill the contract's terms.

There could be a variety of reasons for this - maybe one party isn't holding up their end of the deal, or perhaps circumstances have changed and the contract is no longer necessary or feasible.

Termination can happen in different ways. It could be mutual, where both parties agree to end the contract. Or one party could terminate it if the other party breaches, or breaks, the terms of the contract. Sometimes, the contract itself might have specific conditions under which it can be terminated.

It's important to remember that termination isn't as simple as just saying 'I quit'. There are usually procedures that have to be followed, and sometimes penalties for terminating a contract early. That's why, in the world of business, termination is a big deal.


  • Scenario Description
    A business enters into a contract with a supplier for delivery of goods. After a few months, the supplier consistently fails to deliver on time. In this case, the business might terminate the contract because the supplier has breached, or broken, the terms of the contract. This is an example of termination due to breach of contract.
    Two companies have a contract for shared marketing services. Due to changes in the market, the services are no longer beneficial for both parties. Here, both companies might mutually agree to terminate the contract because it's no longer beneficial. This is an example of mutual termination.