Q&As
Where a termination clause permits termination when a party ceases to carry on business, is there a legal definition of ‘ceases to carry on business’? Does the party have to fully terminate all business activities to be deemed to cease to carry on business? If the party ceases a substantial part of its business or is winding down (making 80% of its staff redundant or closing down warehouses), would it be sufficient to be deemed to ‘cease to carry on business’?
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Published on: 25 March 2019
Termination clauses
Termination clauses typically provide for an agreement to be ended on notice or with immediate effect upon specified events occurring, such as material or persistent breach of its terms or insolvency. They are interpreted in the same way as other terms of commercial agreements. For further guidance, see Practice Note: Contract interpretation—the guiding principles and Formation and interpretation—overview.
Clauses giving the right to terminate on the cessation of business are usually combined with a clause giving such right on the insolvency of the other party. For example, it might be to the effect that either
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Jurisdiction(s):
United Kingdom
Key definition:
Carry definition
What does Carry mean?
A cost (which includes an opportunity cost) or benefit that accrues over time. It might include for example the interest which is not received because the money was not left in the bank but invested in an investment.
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