Thursday, November 15, 2007

It's Not You, It's Me

Ken Adams on AdamsDrafting heard lawyers at a conference for corporate counsel using the phrase "termination for convenience." He checked the SEC's EDGAR site and discovered that the phrase appaears in a variety of contracts calling for performance over time. Here's an example from a T-Mobile services agreement:

6.2 Termination by T-Mobile for Convenience. T-Mobile may terminate this Agreement, the Services performed at any Site or any one or more Statements of Work hereunder for convenience by giving at least ninety (90) days’ prior written notice to the Provider. However, unless otherwise provided under this Agreement, T-Mobile will not exercise its termination for convenience rights for the Agreement during the first year following the Effective Date.

Adams eschews use of the phrase. He suspects that drafters use it "simply because it sounds less threatening than termination for any reason and rolls off the tongue more readily." He suggests tightening the language to something like: "Acme can terminate for any reason. " Ok, that's more direct than "for convenience." The problem, as Adams concedes, is that it's a little "in-your-face" for the taste of some drafters.

The task of reserving explicitly the right to dump your contract partner on a whim is a snarly practice issue for the same reason that negotiating express escape terms is tricky in personal relationships. Marriage, as a legal matter, features mutual termination for convenience rights. But, most people think of termination rights in marriage as limited, perhaps by usage of the trade, to something short of "for any reason." How to negotiate through that is a topic for another day.

Adams concludes with a suggestion for the careful contract drafter: "Unrestricted Termination.” Nice try, but that's not much better. No matter how you phrase it, the fallout from unilateral exercise of unfettered walk off rights is a broken heart.

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