Module 6 of 6 — MSAs for Indian Businesses

Termination, Warranties, and Governing Law

Reading module · approx 12 min

The termination clause is the least read and most important provision in any long-term services contract. By the time you need it, the commercial relationship has already broken down. The clause determines what you can do next.

MSAs typically include three types of termination: for cause (following uncured material breach), for convenience (with notice, without needing a reason), and automatic (on insolvency, regulatory action, or change of control). Each has different consequences for what the parties owe each other at the point of termination.

Termination for cause

Termination for cause requires a material breach, written notice identifying the breach, and a cure period during which the breaching party can remedy it. Standard cure periods are 30 days (extendable for complex remediation). If the breach is remedied within the cure period, the notice lapses. If it is not, the innocent party may terminate immediately.

The MSA should specify which breaches are incurable and may trigger immediate termination without a cure period: insolvency, fraud, wilful misconduct, or breach of confidentiality. These are categories where the relationship has broken down irreparably and a 30-day cure period would be commercially inappropriate.

Termination for convenience

Termination for convenience allows a party to exit the agreement without fault, typically on 30 to 90 days notice. The consequence of convenience termination is commercially significant: the terminating party must pay for work completed to date and, if the MSA so provides, a termination fee. Providers should negotiate termination fees for convenience terminations to compensate for committed resources and lost revenue. Customers should cap termination fees and ensure they are tied to actual costs, not speculative future profits.

Consequences of termination

On termination, the MSA should specify: which provisions survive (confidentiality, IP, governing law, and dispute resolution typically survive indefinitely); what happens to work in progress (customer pays for completed milestones; ownership of WIP depends on payment position); and the return or destruction of confidential information and proprietary materials.

Survival clauses A survival clause specifies which provisions of the MSA remain enforceable after termination. Without a survival clause, it is arguable that all obligations terminate with the agreement. Key provisions that must survive: confidentiality, IP ownership and assignment, indemnity, and dispute resolution. Provisions that typically should not survive: service delivery obligations and exclusivity.

Warranties and governing law

Express warranties in an MSA typically include: the provider's warranty that the services will be performed with reasonable skill and care; that the deliverables will conform to the acceptance criteria in the SOW; and that the deliverables will not infringe third-party IP. Customers should note that an implied warranty of fitness for purpose under general contract law may not be excluded without express language — an MSA that excludes only "implied warranties of merchantability" (a US formulation) may not exclude the Indian law equivalent.

Governing law should specify both the applicable law (Indian law, ideally specifying the state) and the jurisdiction for disputes (specific courts). Arbitration clauses should specify the institutional rules (DIAC, MCIA, ICC), the seat, and the number of arbitrators. For smaller commercial disputes, a two-tiered dispute resolution clause — senior management escalation followed by arbitration — reduces litigation costs without eliminating the option.