How to End Things

In Legal English, there are a number of different terms which signify the ending or closing of a contract. Although all of these terms indicate that the previous deal between parties has come to an end, there are subtle differences between the meanings of the terms.

Termination typically refers to the ending of a contract, usually before the natural end of the anticipated term of the contract, which may be by mutual agreement or by exercise of one party of one of his remedies due to the default of the other party.

Under the Uniform Commercial Code (“UCC”) – the applicable Act for the sale of goods in the United States – termination means legally ending a contract without it being breached by either side.

Cancellation refers to the ending of a contract by destroying its force, validity, or effectiveness. Generally, cancellation puts an end to a contract by discharging the other party from obligations as yet unperformed, usually because the other party has breached or defaulted.

Under the UCC, cancellation occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of termination except that the canceling party also retains any remedy for breach of the whole contract or any unperformed balance.

Expiration (or expiry) signifies a coming to an end of a contract period. This term is most often used when the contract has reached the end of its stated term, or length of time, as expressly indicated in the original contract.

Rescission generally refers to the act or process of rescinding (i.e. undoing or unmaking) a contract. More specifically, it refers to the right of the parties involved within a contract to return to the identical state they were in before they entered into the agreement.

Repudiation refers to the refusal to perform a duty or obligation owed to the other party. It consists of such words or actions by the contracting party as indicate that she is not going to perform her contractual duties in the future.

Drafter’s Tip

Although many of the above terms are similar in meaning and may be used interchangeably, in some jurisdictions it is more appropriate to select one term over another when drafting contracts. The use of a particular term may enable a party to end a contract upon the occurrence of a certain event. Alternatively, it could prevent a party from getting out from a contract unless a certain event occurs. For this reason, it is useful to know the differences in the terminology and select the term which best reflects the parties’ intentions.

As always, additional clauses which develop and further explain the parties’ right to end a contract are helpful in matters of interpretation.