Life Sciences Horizons Brochure 2025 - Flipbook - Page 98
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2025 Horizons Life Sciences and Health Care
“How do I terminate this agreement?”: Top tips for terminating an agreement
to achieve an optimal outcome in any subsequent dispute
Increased costs, complex supply chains, and the
impact of the current uncertain business landscape
may lead to companies in the life sciences and
health care industry experiencing issues with a
counterparty’s performance and considering their
options, including termination of contracts. Often,
termination is hotly contested, particularly when high
value and/or long-running contracts such as license,
development, and distribution agreements are
unilaterally ended, leading to arbitration or litigation
where the termination comes under intense scrutiny.
If a court or tribunal finds that a party has wrongfully
terminated, the financial consequences could be
severe, with the wrongfully terminating party
potentially liable for substantial damages.
So, what questions should a party ask before terminating to
ensure effectiveness?
Do I have a right (or rights) to terminate? Termination rights
may be set out in the parties’ agreement, for example, where a
party commits material breach(es) of contract, fails to pay
sums owed, becomes insolvent, or becomes involved in
compliance-related or illegal behaviors. Some agreements
allow termination without cause. Termination rights might
also exist outside the contract under the relevant applicable
law. Careful consideration should be given to whether the
specific facts give rise to any termination rights, and the
evidence available to substantiate those facts in a dispute.
When should I terminate? Consider any timing requirements.
For example, the contract may include a “cure” period within
which certain breaches may be remedied, failing which, the
non-breaching party may have a right to terminate at the
expiry of the cure period (but not before). Commercial
considerations, such as the need to avoid supply disruptions,
may affect the decision to terminate. However, a terminating
party should exercise caution because the longer termination
is delayed, the greater the risk of inadvertently waiving one’s
right to terminate. Consider if it is possible to buy time by
expressly reserving the right to terminate.
How should I terminate? Check the contract and comply
with any relevant formalities. There may be provisions
dictating information that must be included in the termination
notice and how, where, and to whom, it is to be sent. At a
minimum, the notice should clearly express an unequivocal
intention to terminate the contract in its entirety and identify
the right(s) relied upon.
Careful consideration of available termination right(s) and
how they apply to the situation in question, the timing of
termination, and adherence to any relevant formalities will
maximize the chances of a termination withstanding scrutiny
in a subsequent dispute.
Annabel Maltby
Partner
London
Sam Zimmerman
Partner
New York
Charlie Chetwood
Senior Associate
London
