Contract Duration Clause: Everything You Need to Know
A contract duration clause, usually found in employment contracts, is a provision that outlines how long the contract is effective.3 min read
A contract duration clause, also known as a term clause, is a provision that outlines how long the contract is effective. The clauses are usually found in employment contracts.
Duration Clause Overview
If you want to define a period, or term, where an agreement will be effective, you need to use a duration clause. In addition to defining the length of a contract, these clauses also describe circumstances for early termination of the effective period.
Not every contract will have a set duration. If a contract does include a duration clause, however, then it's common for both parties to have the right to renew the effective term if they desire. If you want to use a condition to end the effective term, you should clearly describe this condition within the duration clause. You can also define this condition in a separate attachment.
There are several clauses that a contract may include that relate to the duration clause:
- Termination clause
- Effect of the termination clause
- Survival clause
The purpose of an Effect of Termination clause is to define how the contract ending will affect the party's responsibilities. Typically, the end of a contract means that the parties are no longer obligated to each other in any way. The exception to this is if there are still outstanding payments due or acts a party needs to perform. An Effect of Termination clause can describe how the parties should handle these remaining responsibilities.
A Survival clause describes what obligations will continue behind the life of the contract. For instance, if there is a confidentiality clause included in a contract, parties will usually have to abide by this clause even after the contract ends.
Term Contracts and Employment
Every employee wants to know exactly how long their job will last, which is why it's important to determine if your employer can fire you without notice or if you are secured by a term contract. Most employees assume that they can either be an at-will employee, meaning they can be let go at the discretion of their employers, or an employee contracted for a defined term. In reality, there are a variety of options for employment, meaning employees should be very careful when negotiating the length of their employment.
Most employment arrangements do not provide a fixed term, also known as at-will employment. This arrangement allows the employer or the employee to end their relationship whenever necessary. While this can mean less job security for employees, it also means the employee will not be stuck in a job they no longer wish to work until their contract ends.
A common misconception about at-will employment is that an employer can terminate an employee for any reason. Fortunately, this is not the case. An employer cannot fire an employee for illegal reasons such as discrimination.
One type of at-will employment requires that the employer give the employee notice before ending their relationship. Likewise, the employee must alert their employer if they plan to leave their position. In general, employers request that their employee give notice of termination between two weeks and a month prior to ending their employment.
Many employers, unfortunately, do not follow these rules themselves. Instead of notifying employees that their job is coming to an end, they instead decide to terminate the relationship and simply pay the employee for those two weeks. Some employment arrangements do not have a fixed term, but they also restrict when an employer or employee can end the relationship. For instance, a person's employment may continue so long as certain conditions are met, such as the business remaining open.
When most people talk about an employment contract, they are referencing a fixed-term contract. With these contracts, an employee receives promise of work for a set period of time, and the employee also promises to maintain their employment during these periods.
An employee who signed a fixed service contract can be terminated early, but the employer must provide a valid reason and proof for the termination. For example, if the employee was not providing the services agreed upon in the fixed term contract, the employer would need to provide evidence that the employee was not fulfilling their obligations before termination could occur.
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