Legal Audits (Vol 3, Pt 3) - Duration and Termination - Raj, Ong & Yudistra Advocates & Solicitors

Legal Audits (Vol 3, Pt 3) – Duration and Termination

Patrick Lim
Partner at Raj, Ong & Yudistra

Continuing with our look at the types of clauses to focus on when carrying out legal audits, the next two types of clauses we recommend you look at are clauses related to the duration of the agreement, and what happens if it is terminated.

Duration or Term

When reviewing this item, you should consider the following:

Review the term of the contract: Make sure that you understand the duration of the contract and any provisions related to renewal or extension.
Confirm that the term is appropriate for the company’s needs: Ensure that the term of the contract is appropriate for the company’s needs, considering factors such as the expected duration of the business relationship and the company’s overall risk profile.
Check for any automatic renewal provisions: Review the contract to ensure that it does not contain any provisions for automatic renewal or extension, unless they are appropriate for the company’s needs.
Consider the notice requirements for termination: Review the provisions related to termination of the contract and confirm that the notice requirements are fair and reasonable.

Overall, it is important to review the term of the contract and to confirm that it is appropriate for the company’s needs. This helps to ensure that the contract is consistent with the company’s overall business objectives and that it does not expose the company to unnecessary risks.

Termination

The next item on the contract review checklist is “Termination.” When reviewing this item, you should consider the following:

Review the provisions related to termination: Make sure that you understand the provisions related to termination of the contract and any conditions or requirements for termination.
Confirm that the provisions are fair and reasonable: Ensure that the provisions related to termination are fair and reasonable, considering the rights and obligations of the parties under the contract.
Check for any early termination fees or penalties: Review the contract to ensure that it does not contain any early termination fees or penalties that are unreasonable or disproportionate to the company’s exposure to risk.
Consider the notice requirements for termination: Review the provisions related to termination of the contract and confirm that the notice requirements are fair and reasonable.

Looking at the conditions for termination helps to ensure that the company has the flexibility to terminate the contract if necessary, and that the company is not exposed to unreasonable fees or penalties in the event of termination.

In the next part, we will be looking at clauses related to the obligation of parties and performance requirements.

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