Posts Tagged 'cure period'

Should all Termination Clauses have a Cure Period?

Some termination clauses in contracts draw a distinction between breaches which are irremediable and breaches which can be remedied. The purpose of drawing this distinction is that irremediable breaches are said to permit immediate termination while remediable breaches are subject to a specific cure period.

In theory this is fine. In practice it presents a problem. The reason being that it is not easy to tell as a matter of practice whether a specific breach can be remedied or not. A good example is an obligation to pay on a certain date. If the payment is not made on the given date, can it be made later? This problem is compounded by the fact that if you get it wrong, then you will not have complied with the termination clause and will therefore yourself have repudiated (and will be exposed to suit for wrongful termination). This is particularly problematic because such termination clauses typically tend to draw a clear distinction between termination for remediable breach and termination for irremediable breach, so you can’t use the remediable breach clause if the breach is in fact irremediable (and vice versa).

As a practical matter it may be preferable to structure a termination right with a cure period in each case. The trade off is a period of time for a possible remedy against certainty in the right to terminate.


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