Before Terminating A Contract: What Needs To Be Checked
April 22, 2026
BY: IAN ANDREW LAW
A contract relationship starts to fail, and the instinct is often immediate: stop the arrangement, send notice, and move on. In business terms, that can feel efficient.
In legal terms, termination is one of the most sensitive steps on the file. The question is rarely just whether the relationship should end. It is whether the contract allows it, on what terms, and through what sequence.
Key Takeaways
• Termination can solve a problem or create a bigger one.
• The first question is whether a termination right exists and how it works.
• Cause, cure, notice, and timing all matter.
• Post-termination obligations and damage exposure need to be reviewed before the step is taken.
• A termination decision is both a legal and a commercial decision.
Identify The Source Of The Termination Right
Some agreements contain detailed termination clauses. Others do not. Sometimes the right arises from an express clause. Sometimes the issue becomes whether the other side’s conduct amounts to repudiation or a sufficiently serious breach at common law. Those are not the same analysis, and treating them as if they are can be costly. Whether common-law termination is available is highly fact-specific, and not every serious performance problem rises to the level of repudiation.
The contract may also distinguish between termination for cause, for convenience, on notice, or after a cure period.
Check The Mechanics Before Taking The Step
Once a termination path is identified, the mechanics matter. Was notice required? Does the contract specify method of service? Is there a cure period? Is there a requirement to provide particulars? Has the terminating party itself complied with the agreement up to this point? Small process failures can become large litigation points when the termination itself is challenged.
Termination also often interacts with limitation of liability clauses, survival clauses, transition obligations, confidentiality, return of property, and restrictive covenants.
Think Beyond The Act Of Termination
The legal question is not just whether the business wants out. It is what happens next. Can the contract be replaced quickly? What losses may be claimed by either side? Is ongoing performance needed to protect the business during transition? Could the counterparty seek urgent relief? What does the written record say about who caused the breakdown?
These questions are why termination decisions benefit from calm review rather than impulsive execution.
Why Early Analysis Matters
A valid termination can preserve rights and contain loss. An invalid termination can hand the other side a cleaner and sometimes stronger claim than the one the business thought it was answering. The difference is often found in the contract details and the chronology.
Termination is sometimes the right move. It is rarely the move to make casually. The legal risk often lies not in the decision to end the relationship, but in how that decision is carried out.
That is why termination calls for checklist discipline rather than impulse. Where the contract permits an exit, careful execution protects the business. Where it does not, speed can convert a performance problem into a wrongful-termination problem.
Sources
• Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53.
• Bhasin v. Hrynew, 2014 SCC 71.
• C.M. Callow Inc. v. Zollinger, 2020 SCC 45.
• Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7.
• General Ontario common-law principles respecting repudiation and termination; the analysis is fact-specific and not governed by a single statute.
This article is for general information purposes only and does not constitute legal advice. Reading this article does not create a solicitor-client relationship. If you require advice specific to your situation, contact my office.