“Termination” and “Expiration”

During a recent in-house seminar, a participant took issue with one of my sample provisions, namely This agreement terminates on August 23, 2007. The participant argued that termination entails one or more parties’ ending a contract sooner than it otherwise would have ended; he said that in this case the correct word to use would have been expires.

At the time, I said something noncommittal and moved on. I’ll now take the opportunity to explain why I’d leave my sample provision as is. (To those seminar participants who ask awkward questions, thank you!)

One can readily find in legal reference works instances of termination used to refer to any means by which a contract comes to an end. Consider, for example, the following, which is from 17A Am. Jur. 2d. Contracts § 524: “A contract may be discharged by performance in accordance with its terms; in fact, this is the normal termination of every contract. A contract may also be terminated by the expiration of the time during which it is to remain operative.” In this passage, expiration is considered a form of termination rather than something distinct from termination.

This understanding of the relationship between termination and expiration can be found outside the realm of contracts. For example, the heading of 4 N.Y. Jur. 2d Appellate Review § 650 is “Expiration or other termination of order appealed from.” Again, expiration is just one form of termination.

On the other hand, it’s even easier to find contract language suggesting that expiration doesn’t constitute a form of termination. To select an example at random, a contract filed last week on the SEC’s EDGAR system contains the following: “All such charges and expenses shall be promptly settled between the Parties at the Closing or upon termination or expiration of further proceedings under this Agreement.” If expiration constituted a form of termination, logic would require that one omit “or expiration.” Innumerable similar examples come readily to hand. But that doesn’t mean you should emulate them.

The definitions of termination and terminate in Black’s Law Dictionary are consistent with the notion that termination includes expiration. Termination is defined as meaning “The act of ending something” and “The end of something in time or existence.” In other words, termination is both something you do and something that can simply happen. To the same effect, terminate is defined as meaning “To put an end to; to bring to an end” and “To end; to conclude.”

Interestingly, the definition of termination in Black’s contains a link to Corpus Juris Secundum Contracts § 422, which states that “The word ‘termination’ generally refers to an ending, usually before the end of the anticipated term of the contract.” But the one case that it cites for this proposition itself quotes the sixth edition of Black’s—the current edition is the eight—as stating that termination generally “refers to an ending, usually before the end of the anticipated term of the … contract.” It’s reasonable to conclude that the editorial staff of Black’s subsequently eliminated that limitation on the meaning of termination because they decided that it wasn’t warranted.

But a cardinal rule in drafting is to avoid, to the extent possible, relying on a court to construe a word in a particular way. So even if you, like me, consider that termination is best thought of as including expiration, it would be reckless to leave the matter open to question in a contract. In this regard, the provision the seminar participant questioned—This agreement terminates on August 23, 2007—poses no problem, in that there is no possible confusion as to its meaning. And if you use termination in this context, it follows that if elsewhere in the same contract you specify the consequences of termination, those consequences apply not only if the parties take steps to terminate the contract, but also if the contract expires.

But why not use expires in the provision in question instead of terminates? Because not only would it be unnecessary to do so, it would also lumber you with having to use elsewhere in the contract more ponderous constructions such as When this agreement expires or is terminated [or otherwise terminates] rather than just When this agreement terminates. (Note that using instead When this agreement is terminated would suggest that the stated consequences only apply if the parties terminate the agreement as opposed to letting it expire.)

By the way, one can dismiss out of hand the usage terminates and expires, as in This agreement will terminate and expire upon cessation of commercial operation of the Plant. Depending on the meaning of termination that you prefer, terminates and expires entails either inconsistency or redundancy.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

9 thoughts on ““Termination” and “Expiration””

  1. I’m going to agree with the question asker. While termination and expiration may be synonymous, the effect of “expiration” and “termination” ought to be treated differently. As I have used and understood it, expiration is the “end” of the agreement term. On the other hand, “termination” is what happens when one does not reach the end of the term. Indeed most of the contracts I’ve reviewed include both a “Term” and a “Termination” clause.

    Indeed, it seems advantageous for a contract to treat what happens in either situation differently. For example, I “terminate,” you can get a refund, but if the agreement “expires,” nothing happens since the agreement has done for both of us what we intended it to do. Clearly, you shouldn’t get a refund if the agreement expires.

    Now, it may be that the “refund” contemplated by the example is really a codification of the remedy available to me at law, but why would I want to sue?

  2. I recently re-wrote a website use agreement. After some thought, I replaced every use of the words terminate, expire, and cancel (and their variants) with the word end. “If you want to end this agreement, you may do so at any time by sending us notice.” “When this agreement ends (regardless of how it ends or who ends it) . . . “

  3. I have a situation that has a monetary outcome based on the difference between expiration and termination and it’s interpretation in an agreement.

    I had an agreement that required I carry errors and omissions insurance during the life of the agreement and “for a period of not less than two years after the expiration of this agreement”.

    However, the agreement has been terminated by the buyer well before the expiration, and well within the rights of the buyer per the terms of the agreement, but it was terminated and did not expire. For reference, this requirement to carry insurance is under a section of the agreement titled “INSURANCE”.

    Under the section “SURVIVAL OF TERMS”, it says “Termination or expiration of this Agreement for any reason shall not release either party from any liabilities or obligations what (i) are set forth in the Sections of the Agreement entitled “Ownership of Work Product”, “Proprietary Rights Indemnification”, “Cross Indemenification”, “Limitation of Liability”, “Confidentiality”, “Taxes”, and “Compliance with Laws, Regulations and Policies”, or (ii) remain to be performed or by their nature would be intended applicable following any such termination or expiration.

    Since the agreement was terminated and did not expire and the section titled “INSURANCE” requires the insurance for two years beyond the “expiration” and because the “INSURANCE” section of the document is not specifically indicated in the “SURVIVAL OF TERMS”, I don’t believe I am still required to to carry the insurance? Because of the termination, there was no expiration, and therefore no applicable date of reference by which to calculate the two year insurance maintenance period beyond “expiration”. Does termination CAUSE expiration or does it VOID expiration, or does the original expiration continue to exist?

    Obviously, I would want it to void expiration and then argue that this insurance is not “intended applicable following any such termination or expiration”.

    The buyer does not even want the data from the services supplied, which further indicates that the data in which I was insuring is not “intended applicable” after the termination, so the “INSURANCE” section of the agreement does not survive.

  4. Ryan: Your situation is a great example of how distinguishing between termination and expiration can trip up a drafter. I suspect that in the provision in question, the drafter screwed up by not saying “termination or expiration.” The question is whether the other party gives up without a fight or not. But not that this doesn’t constitute legal advice! Ken

  5. I am in a position that a Joint Venture Agreement was prepared and the developer could not come up with the financing. The Joint Venture agreement has an expiry date of 31 December 2015.
    The developer was given until 15 January 2016 to come up with financing that he said he had in place but on 15 January 2016 I was told I had to wait longer for him to get a better deal. We have a 1.5 million dollar mortgage on the property from the JVA, that the developer was to pay for not me. The developer said he would pay the 1.5 M mortgage by November 2015, but he did not.
    I then put the property up for sale as we would be required to pay the 1.5 M by June 2016 or we would default.
    I have a purchaser for the property and the previous developer put a Certificate of Pending Litigation on the property because he states that-
    failure by the Developer to have commenced construction of the works and services required by the Township within six (6) months of authorization by the Township to the Developer to commence the said construction.
    (b) failure by the Developer to have completed installation of the Works and Services and to have received from the Township the written approval of Certificate of Substantial Performance of the Works and Services by:
    (i) December 31, 2015; or
    (ii) six (6) months following the execution of a servicing agreement by the City with respect to the Works and Services
    whichever is later.
    (c) Sixty (60) days after delivery of notice in writing from the Developer to the Legion if the Developer, having used Reasonable Commercial Efforts determines in good faith and after consultation with the Legion that to continue with the Project would have a material adverse affect on the Developer or the Legion.
    The building in question is a Royal Canadian Legion that is owned by Veterans of Canada.
    This so called Developer has been trying to complete this development for eight years. The JVA is dated January 31, 2008. The agreement has an expiry date.
    It reads that the contract expiry date is December 31, 2015.
    This developer wants to be paid three million dollars and sign the property over to him even though we have spent 1.2 million on soft costs and he has spent nothing.
    My question is!! Has this contract expired or not?

  6. I’m currently translating a company’s ‘Standard Terms and Conditions of Sale’ from French into English. In my source document, the French contract drafter has made a distinction between the “Terme du contrat” (Contract expiry) and the “Résiliation du contrat” (Contract termination). The clauses below each heading make it clear that “Terme” refers to the end date of the contract if the contract were to run its full course, while “Résiliation” is being used to refer to the end/termination of the contract triggered by a breach of some kind.

    The more I look at it, however – there really doesn’t seem to be any reason why the two clauses couldn’t be merged, or why a different term should really be required. They both refer to the same event (the contract ending), but under different circumstances. The context makes it clear what those circumstances are. I suppose the drafter has used the two terms for the sake of uber-clarity.

    When translating contracts, I’m often required to choose two distinct terms in such cases (mostly to appease the client and to ensure formal equivalence, in the case of official documents), so I’m quite grateful the two terms exist in this case, even if it could arguably be streamlined.


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.