A Grant Agreement documents funding terms for projects or research initiatives. This playbook explores performance milestones, reporting requirements, and clawback conditions.
Why This Matters: Balanced termination provisions protect parties in adverse situations and provide deal certainty, preventing undue obligations or litigation.
Negotiation strategy
If you're the Grantor:
Ensure termination clauses include a reasonable notice period and no undue penalties. Advocate for clear definitions of material breach and fair cure periods.
If you're the Grantee:
Negotiate for break fees that reflect potential costs incurred. Ensure exit mechanisms allow for renegotiation in case of significant changes.
Essential elements
1
Termination for Convenience
Allows exit with notice.
2
Termination for Cause
Exit upon material breach.
3
Break Fees
Compensation for termination.
Action framework
ACCEPT
Propose edits if notice periods are too short or penalties are excessive.
EDIT
Reject clauses that lack clear breach definitions or fair cure periods.
ADD
Add clauses if exit mechanisms are missing or unclear.
PRO TIP
Ensure termination rights are clear and balanced to protect both parties.
Example clauses
FAVORABLE
Preferred Termination for Convenience
"Either party may terminate this Agreement for convenience upon providing thirty (30) days written notice to the other party. Upon termination for convenience, neither party shall be liable to the other for any damages, losses, or expenses incurred as a result of such termination, except as expressly provided in this Agreement."
NEUTRAL
Standard Termination Clause
"Termination may occur with mutual consent or upon breach, subject to notice requirements."
UNFAVORABLE
Unclear Termination Rights
"Termination rights are subject to conditions not specified in this Agreement."
Fallbacks
High-Risk Projects
In high-risk projects, ensure termination clauses allow for quick exit to mitigate potential losses.
Long-Term Contracts
For long-term contracts, include periodic review clauses to reassess termination rights.
Joint Ventures
In joint ventures, ensure exit mechanisms allow for equitable distribution of assets upon termination.
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