Most contracts contain a termination clause. This is a clause that sets forth the conditions under which that contract shall terminate and may contain a provision that provides that the contract will terminate if one of the parties is bankrupt or tries to assign the contract to a third-party without the consent of the other party or that it will terminate as of a particular date or after the passing of a particular period of time.
Here’s a puzzler.
Suppose a termination clause in a contract contains a provision that states, “This agreement shall be effective from the date it is made and shall continue in force for a period of five (5) years from the date it is made, and thereafter for successive five (5) year terms, unless and until terminated by one year prior notice in writing by either party.”
When can you terminate that contract? If you read the first two clauses only, it would appear that the contract goes on for five years and then goes on for a successive five years and then for another successive five years until the end of time. But read on to the last clause and it looks like you can terminate the contract as long as you give one year prior written notice to the other party. But when can you give that notice. One of the parties believed that “prior” referred to the five year term, meaning that you had to wait four years to terminate it or one year “prior” to the end of the term. It was wrong, according to the government of Canada, which ruled that you could get out of this eternal contract at any time as long as you give the other side one year’s written notice of your intent to do so.
The government ruled that the meaning of the clause was clear and unambiguous. So clear and unambiguous that the party that objected to the government’s decision commissioned a 69-page affidavit to support its opinion otherwise.
One thing that is clear and unambiguous here; that affidavit was written by a lawyer.
