We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Cancellation Clause?

Mary McMahon
By
Updated: Jan 24, 2024
Views: 11,832
Share

A cancellation clause is a section of a contract spelling out the terms under which either party can break the contract, usually as a result of special circumstances. In a simple example, a lease agreement can include a note that the property owner has the right to terminate the lease if the building is sold. While the contract can broken in other circumstances, there will be penalties, and these penalties are also discussed in the terms of the agreement so both parties know what to expect over the course of their relationship with each other.

Cancellation clauses are included to account for events that could change the nature of the contract or the business relationship. There are some special circumstances under which people might need to cancel through no fault on either side and providing a way to do that without penalty can be beneficial. For example, people may be able to provide more warning if those circumstances arise, allowing the other party to the contract to prepare ahead of time.

In the cancellation clause, people are provided with a list of circumstances where it will be considered acceptable to break the agreement. Usually, it requires that people give advance warning and people may be required to pay a small fine, although it will not be as large as the fine paid for breaking the contract in other circumstances. For instance, a landlord may agree to help a tenant relocate if a building is sold and not enough notice is provided to move out.

Cancellation clauses should be reviewed with care. People who may need to break an agreement need to know whether their need is covered by this clause and should familiarize themselves with the procedure for legally breaking the agreement. Conversely, people who suspect that the other party is violating the terms of the cancellation clause can review it to see if a cancellation is covered or not.

Certain types of agreements come with a standard cancellation clause. This can be edited to suit the needs of both parties, ideally with the assistance of an attorney to make sure the clause is accurately and appropriately edited. It is important to be aware that illegal clauses cannot be inserted into a contract; if an attorney feels that the language of a cancellation clause violates the law or sets up a situation that could potentially be illegal, the lawyer will usually advise changing the clause to keep it within the law.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGeek researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Editors' Picks

Discussion Comments
Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
Share
https://www.wise-geek.com/what-is-a-cancellation-clause.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.