NY Contract Law: Expiration ≠ Termination

by | Mar 22, 2015 | Uncategorized

“Expiration” and “termination.”

Pay attention to those words when reading and negotiating (and of course enforcing) contracts governed by NY law. Under NY contract law, the words are NOT synonymous. So says the Second Circuit Court of Appeals in a February 2015 decision. This is the appeals court that has jurisdiction over the federal trial courts located in New York State.

The Second Circuit ruling states that the words should not be used interchangeably to refer the ending of a contract.

Unless the language dictates otherwise, in general, under NY contract law:

  • “expiration” means the natural ending of a contract pursuant to its terms without any action by a contracting party; while
  • “termination” means the premature ending of a contract as a result of action taken by a contracting party.

The way in which a contract comes to an end is significant. First, the contract will often include very specific steps that a party has to take before it can terminate the relationship without breaching the contract.  Also, the rights and obligations of the parties often differ dramatically, based on whether the contract expired or was terminated. For example, a party may have to provide warranty work following the natural expiration of a contract, but not if the contract is terminated prematurely.

Remember, in general, under NY contract law, a contract expires on its own after the passage of time and is terminated based on a party’s actions.