Law Stack Exchange is a question and answer site for legal professionals, students, and others with experience or interest in law. It only takes a minute to sign up.
Sign up to join this community
In a business contract, does the following statement :
"This provision survives the termination of this Agreement."
Means that the provision survives for a unlimited amount of time? Is there a legal limit to this? Isn't it abusive? If yes, can this be legally enforced?
Jurisdiction has not been provided, so I've written a general answer:
Not necessarily; often, such provisions clauses will have their own expiration dates, for example "for five years after signing, X", with X still being valid after cancellation up to 5 years(so if you cancel after 3 years, X is still valid for 2 more years), or "for two years after cancellations, Y"(especially common with non-compete clauses) where the time-limit of Y starts when the contract is cancelled.
Other clauses are meant to indeed be enforced forever, such as some non-disclosure, non-disparagement, or indemnity clauses. For example, an indemnity clause in a contract that prevents a party from suing the counter-party for work done under the contract would be pointless if it could be bypassed by a party terminating the agreement.
There are lots of legal limits, based on the terms of the provision, and its nature, all governed by the contract law of the jurisdiction under which the contract was drafted under and/or is governed by (this is generally obvious, except for some cross-border contracts, which generally will have a declaration as to whose laws apply).
It is not inherently abusive, but can certainly be abused. What is considered abusive often varies from jurisdiction to jurisdiction (not only on this issue, but on legal issues in general).
It depends on the jurisdiction, and generally on the terms of the provision itself. If the court asked to enforce the terms of the agreement feels that the provision is illegal or abusive, they won't be enforced (and possibly the entire document declared null and void, depending on the central-ness of the illegal or abusive provision; some provisions specifically state that invaliding the provision doesn't invalidate the whole contract to try to prevent this). If they don't feel the provision is illegal or abusive, they will generally enforce it.
provision survives for a unlimited amount of time ?
Yes, that's what it means, unless other portions of the contract support a reasonable interpretation that the validity thereof is time-limited.
Is there a legal limit to this ?
Under U.S. contract law, there is no limit for a business context. I highly doubt that other countries applying similar principles of contract law (for instance, some or perhaps many European countries) would enact a time limit for business contracts.
Isn't it abusive ? If yes, can this be legally enforced ?
Being abusive and/or enforceable largely depends on what exactly is agreed upon. The more unreasonable the clause as applied to that particular [legal and factual] context, the unlikelier it is for the clause to withstand judicial review.
Generally speaking, the fact that a person knowingly and willfully consented to a clause in a contract makes it very hard to strike or reverse that clause in court. Therefore, it is extremely important not to sign a contract that contains clauses which since its inception (that is, inception of the contract) you deem abusive.
Though amusing, there is a reasonable scenario for this language. Suppose the main contract is for one party to buy items from the other at some rate and price. It is recognized that business conditions might change, so one or the other would not want to continue the contract. There could be conditions where one party could terminate the contract, perhaps with the payment of some penalty. The provisions referred to could be protection of intellectual property, use of trademarks, or some such. Even if the purchase agreement is terminated the parties could want to keep these protections as a default. Presumably they could agree to amend the section referred to, but the idea is that terminating the sales part does not terminate the IP agreements.
