How to review a termination clause

The termination clause decides how each party can get out of the contract and what happens when it ends. Weak drafting here turns a simple exit into a dispute about notice, refunds and data. This guide covers how to read a termination clause, the US rules that affect it, and how to review it in Word with LexDraft.

Last checked: 18 October 2026. The law changes; check the current position before relying on this page.

Termination rights to look for

• For cause. Usually material breach that is not cured within a set period after written notice. Check the length of the cure period (30 days is common), whether some breaches cannot be cured, and whether repeated breaches count.
• For convenience. A right to end the contract without a reason, usually on notice. Check whether it is mutual and whether it comes with a fee or a minimum term.
• Insolvency. Clauses that let a party terminate because the other files for bankruptcy are generally unenforceable once a bankruptcy case starts (section 365(e) of the Bankruptcy Code). Do not rely on them as your main exit.
• Change of control. A right to terminate if the other party is acquired, often by a competitor. See our assignment clause guide.
• Regulatory or legal change. A right to end the contract if a change in law makes performance unlawful or uneconomic.
• Prolonged force majeure. A right to terminate if performance is suspended for more than a set period. See our force majeure guide.

Clause checklist

• Material breach. Is "material" defined? A list of breaches that are always material reduces argument later.
• Notice mechanics. Does the termination notice have to follow the notices clause (method, address, deemed receipt)? Many disputes turn on a notice sent to the wrong place.
• Common law rights. Does the clause say its rights are in addition to other remedies, or exclusive? An exclusive termination procedure can limit the right to end the contract for a serious breach.
• Effect of termination. Payment of fees accrued to the termination date, refunds of prepaid fees, return or destruction of confidential information and data, and termination of licenses.
• Transition. For services and SaaS, a transition period, data export in a usable format and continued access for a set time.
• Survival. Confidentiality, indemnities, limitation of liability, payment, governing law and any other clause meant to outlive the contract.
• Auto-renewal. If the contract renews automatically, check the deadline for a non-renewal notice and any state automatic renewal laws that apply, especially in consumer contracts.

A termination clause review workflow in Word

LexDraft is a Word add-in from Microsoft AppSource. It opens as a side panel in Word 365 (Windows and Mac), Word 2021 and Word on the web, so the agreement never leaves the tool you already draft in.

1. Open the agreement in Word and open LexDraft in the side panel.
2. Pick the governing law. Select the state named in the governing law clause so LexDraft looks for state-specific red flags.
3. Run the review. Run the review on the whole agreement. For NDAs, SaaS MSAs, DPAs and services agreements, run the matching playbook on the whole agreement; for other contracts LexDraft runs a general review against the governing law you chose. LexDraft has no separate clause-only playbook.
4. Triage by severity. Findings are graded Critical, High, Medium or Low, and LexDraft flags standard terms that are missing.
5. Run the quick checks. The defined-term and cross-reference checks are rule-based and run without AI.
6. Accept or reject each redline. Accepted changes land as native Word tracked changes.
7. Verify and sign off. You check every output before it goes to the client or the other side.

What LexDraft does not do

LexDraft does not give legal advice or decide whether a breach is material. Nothing changes in your document until you accept a redline.

This guide is general information, not legal advice. LexDraft does not give legal advice; qualified counsel must review every draft. Spotted something out of date? Email support@lexdraft.ai and we will fix it.