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What is the Difference between Termination and Expiration?

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Many people (indeed, too many lawyers) are not aware of the difference between termination of an agreement and expiration of an agreement. This post explains that difference and discusses why it matters.

Expiration is the ending of an agreement pursuant to its terms without any action by a party to the agreement. Expiration commonly occurs at the end of a defined period of time – for example, a lease may expire at the end of one year.? Expiration may be linked to other events, however. For example, a patent license agreement may expire when the underlying patent expires.

Termination is the ending of an agreement as the result of an action taken by a party to the agreement. For example, an agreement may provide that either party may terminate it upon ten days’ written notice if the other party breaches the agreement and does not cure the breach during the ten-day notice period.

Why the difference matters: A carefully-drafted agreement may specify that a party’s rights after expiration differ from its rights after termination. For example, one of my clients has a license agreement under which? the client incorporates pieces from a popular board game into jewelry. If the agreement expires, the client may sell off any remaining inventory during the 60-day period following expiration. In contrast, if the agreement is terminated by the licensor for breach by the licensee, there is no sell-off period.

Photo credit: Lars Sundstrom via stock.xchng

Dana H. Shultz, Attorney at Law? +1 510 547-0545? dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

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