Licensing Agreement #14 Termination
10-01-09
For the next few posts I will be breaking down a general Licensing Agreement clause-by-clause and giving brief explanations on what it all means. For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).
This is the next clause in a Licensing contract:
12 TERMINATION
12.1 This Agreement shall be terminated if any of the following occurs during the Terms of this Agreement:
(i) If the Licensed Product becomes subject to any voluntary or involuntary order of any government agency involving the recall of any of the Licensed Products and or Promotional Material because of safety, health, or other hazards or risks to the public.
(ii) If either party breaches any of the provisions of this Agreement relating to the unauthorized assertion of rights in the Property or Product.
(iii) Should Licensee fail to make timely payment of Royalties when due or fails to make timely submission of Royalty Statements when due, two or more times during a twelve month period.
(iv) If the Licensee files a petition in bankruptcy or is adjudicated a bankrupt or insolvent, or makes an assignment for the benefit of creditors, or an arrangement pursuant to any bankruptcy law, or if the Licensee discontinues its business, or if such a receiver is not discharged within sixty (60) days.
(v) Either party shall have the right to terminate this Agreement in the event that the other party commits a material breach of any other provision of this Agreement and said material breach is not cured within sixty (60) days of the notification of the termination.
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Clause 12.1 is broken down into sections described by roman numerals and if any of these points happen, then the Licensing Agreement is terminated.
(i) If the Licensee’s Product is subject to any voluntary or involuntary order of any government agency involving the recall of any of the Licensed Products and or Promotional Material because of safety, health, or other hazards or risks to the public, then the Agreement is subject to termination. This is self explanatory.
(ii) If either party attempts to assert a right (ownership or otherwise) to the other’s Property or Product, that is considered a breach of the Agreement and is subject to termination.
(iii) When a Licensee fails to make timely payment of Royalties or fails to make timely submissions of Royalty Statements when due, two or more times during a twelve month period the Agreement is subject to termination. Note that the twelve month period is not defined as a year (January to December) but could be construed as twelve months from the first late or non-payment. This should be written with a defined time period clearly stated.
(iv) If the Licensee files for bankruptcy or is forced into a bankruptcy or becomes insolvent (your accountant should inform you of this), or makes an assignment for the benefit of creditors, or an arrangement pursuant to any bankruptcy law, or if the Licensee discontinues its business (careful about this as not marketing your products for a period of time could activate this but that is why I recommend you do not have this in a Licensing Agreement if you are the Licensee/from the Licensor’s point of view it should remain in), or if such a receiver is not discharged within sixty (60) days. If the receiver is discharged within sixty days then this termination reason is void but make sure you contact the other party within the time period with proper documentation proving the receiver is no longer involved or the Licensor could say that it was not aware within the time period and hold this termination section as valid even though the Licensee had met the condition to continue the Agreement.
I don’t recommend that the Licensor be given the above sub-clause because the Licensee wants to use the Licensor’s Property if it is breaching this section of the Agreement or not.
(v) Either party shall have the right to terminate this Agreement in the event that the other party commits a material breach of any other provision of this Agreement and said material breach is not cured within sixty (60) days of the notification of the termination. So make sure both parties do not breach any of the clauses within the Agreement and everything will be fine.
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As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel, accounting and tax advice in all contractual matters.
I provide consulting which is detailed on the ‘services’ page of this website.
Hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Your name & Licensing’ in the subject line of your email.
Thank you.
Sandford Tuey