Termination/Payoff Agreement

A termination or payoff agreement is a contract stating that all parties involved consent to the cancellation of a contract. This agreement usually involves a business and an individual or combination of businesses. An individual may not need a business’s services any longer or one party may not be fulfilling their end of the contract. In these cases, a termination or payoff agreement may be necessary.  

Details of a Termination or Payoff Agreement 

A termination or payment agreement will include the names of the involved parties, the previous relationship between the parties, the reason for terminating the contract, and the results and date of the termination. The names of the involved parties are usually provided in the preamble or recitals of the agreement. Normally, the body of the agreement includes the relationship between the parties. It will contain detailed information about the original contract, the obligations that were agreed to, and any other substantive arrangements that were previously made. The termination agreement may provide a detailed or brief description of the termination reason, depending on the situation, but it will outline the circumstances surrounding the termination and any underlying agreements. Finally, the agreement letter will state the effective date of the agreement, potential reimbursements, miscellaneous provisions, and any end-of-body restrictions.


In most cases, the termination of a contract is a mutual agreement that both parties to the original contract must sign. The agreement may include any mutual release of claims, as well as the settlement of any remaining balances. The termination agreement may also unilaterally require the satisfaction of conditions before it becomes mutual. If the original contract includes a termination fee, you must pay this fee by the date specified in the termination agreement. When a termination agreement letter is sent, a record of the letter and the date it was sent is recorded. This establishes proof of notice, on occasion that the other party involved goes against the agreement in the future.  

Sections in Termination/Payoff Agreements 

Sections in a termination/payoff agreement document may include but are not limited to: 

  • Termination of Agreements 
  • Return of any documents 
  • Representation by all parties 
  • Representation by all purchasers 
  • Acknowledgement  
  • Consent and Waiver 
  • Counterparts 
  • Signatures  

When This Agreement Becomes Effective 

In this agreement, a specific date should be highlighted indicating the day of the contract termination. The parties may alter this date under special circumstances, such as hand delivery, delivery by an agent, or the expiration of a certain stated number of days after the agreement has been placed in the mail with prepaid postage. The parties involved may also agree on a post-date – meaning the termination will become effective on a future date.  

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