Wednesday, December 22, 2010


Contract performance is excused when the Contract has been terminated or the contract has lapsed by coming to the end of its term. If there are actions that need to be performed or rights and liabilities that need to continue after that point, the parties must agree to that.  In most contracts the way that is done is through the use of a “survival” clause where the parties show their intent for those obligations to continue and still be enforceable.

For example a simple survival provision could look like this:
The following Sections of this Contract will survive the termination of expiration of this Contract and will remain in effect until fulfilled:
  1. Section entitled “Taxes”
  2. Section entitled “Payment”
  3. Section entitled “Warranties”
  4. Section entitled “Indemnification”
  5. Section entitled “Limitation of Liability”
  6. Section entitled “Choice of Laws and Forum”
  7. Section entitled “Order of Precedence”.

The key in writing any survival provision is to think about what may need to be done after the agreement has ended. You can see from the above list, most deal with either making sure protection remains against third party claims (as those don’t extinguish until the statute of limitations for those types of claims has expired) or ensuring that the parties get what the other party has promised.
  • Taxes would be to protect against tax liability if the Supplier failed to pay taxes they collected from the Buyer.
  • Suppliers always want to ensure that Buyer’s responsibility for payment doesn’t stop.
  • Warranties would include both the warranties to protect against third party claims and any contract warranties such as a warranty against defects in material and workmanship or warranties to correct problems such as in software warranties.
  • Indemnification is to protect against tort and IP infringement claims by third parties that could be brought several years after the agreement has ended.
  • If a Supplier is going to continue to be liable, they will want any limits on liability to survive.
  • Choice of Laws and Forum would be asked to survive in the event of a dispute so that it would be heard where the parties had agreed.
  • Order of precedence would be included so the interpretation of the contract after the agreement has ended would be interpreted in the same manner as during the contract period. 

I’ve seen broad “catch all” survival provision such as “All terms that by their nature should survive the termination or expiration of the agreement shall survive.” I don’t like these for several reasons. First, the parties can easily disagree about whether the nature of the term should or shouldn’t survive.  Second, if a dispute arises courts always look to at what's in the "four corners" of the agreement to understand the intent of the parties. The best way to demonstrate what the parties intended is to clearly describe it in the agreement.