Enforceabilty of Termination for Convenience Clauses in India

When parties agree to enter into a contract they do so with the objective of ensuring that the purpose for which they got into the contract in the first place is accomplished. However, albeit all might be well between them while signing the deal, circumstances can quickly change leading to even the best of allies to a dispute, thereby precipitating the contract being put to an end. One such way this can happen is by way of termination.When embarking on a new project, termination is often the last thought that crosses the parties' minds and is, therefore, often given relatively short shrift in the contract drafting and negotiation stage. In the current economic climate, however, given the uncertainties that can plague even the most well planned businesses, contract termination is a potential outcome parties simply cannot ignore.These clauses are inserted with a view to allow one or either of the parties to evade or discontinue its contractual obligations based on the conditionalities stipulated therein. The operation of such clauses can, therefore, have serious ramifications especially against the party whom it has been invoked. Termination clauses can, therefore, be distinguished into two kinds. (i) With cause and (ii) Without Cause. Termination clauses that do not provide any cause or reason to the other side are generally known as termination for convenience clause, i.e., allowing one party to unilaterally put an end to a contract/agreement based on its volition. These clauses hence, contain no limitation on the circumstances under which one party can exercise this right to evade its obligations