termination fee
Definition
A termination fee is a penalty you pay when you end a contract before the agreed end date. The fee compensates the other party for the business they lose when you walk away early.
Example
If you sign a two-year software subscription but cancel after six months, the provider might charge you a termination fee equal to the remaining monthly payments.
Watch Out
Always find the termination fee clause before signing any contract, because these fees can sometimes cost more than just finishing out the original agreement.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.