Term; Renewal; Early Termination; Perpetual License


The term of the agreement should be explicitly stated, either as a date certain, or a specified amount of time following the effective date of the contract.


Many contracts provide for automatic renewal under the same contract terms and conditions, provided that all parties have the right to terminate by giving notice. This means that doing nothing causes the contract to renew.

Most licensees have many license agreements, each with differing termination dates. Unless licensees develop procedures to track termination dates and automatic renewal provisions, they are likely to end up with unwanted renewals. Generally, licensors can monitor approaching termination dates and give their licensees adequate notice that their contract will be renewed unless the licensor receives written notice otherwise. Modifying a clause to require the licensor to give notice of impending renewal would be preferable to turning the typical clause around to require the licensee to give notice in order to renew the contract. Most database and software users understandably resist this burden.

Early Termination

Termination provisions describe when the parties may stop performing their obligations prior to the end of the contract. Both parties, not just the licensor, should have this right. Most provisions permit termination only for serious breaches of the agreement such as failure to make or keep licensed materials available, failure to pay money owed, breaches of warranty such as the warranty that a product will not infringe another’s copyright, failure to limit access to licensed materials or failure to monitor user compliance with copyright restrictions. The library can avoid the last two breaches by avoiding unrealistic obligations to limit access and monitor use. Additionally, the parties may specify the breaches they consider material. That way, the agreement cannot be terminated for a breach that only one party thought was serious.

Some agreements permit either party to terminate the agreement for any reason, or no reason at all, provided adequate notice is given to the other party. The automatic renewal provisions discussed elsewhere have the same effect: usually either party may terminate by giving timely notice to the other. Although this sounds equitable and convenient, it can lead to surprising results: a licensor could terminate an agreement because of real or imagined copyright violations by the library’s patrons, even though the library may have carefully avoided agreeing to police the use of the licensed materials.

One further protection is to require the party considering early termination to give the other party notice and an opportunity to cure the breach before termination is effective.

Perpetual License

One important issue to consider when negotiating an agreement for access to digital information is what will happen if the licensing agreement expires and one or more of the parties does not wish to renew it. When a library cancels a subscription to a periodical in paper form, it retains the copies it received during the term of the subscription and can continue to provide its users with access to that information. When a library subscribes exclusively to an online periodical, it is only natural to expect that the library should be able to enjoy the same rights with respect to issues that were available during the term of the agreement. A perpetual license clause is designed to do just that: it gives the library and its patrons the right to continue to use digital materials under the same terms and conditions as applied during the life of the licensing agreement. In addition, where access to the materials was under the exclusive control of the licensor–such as, for example, through password access to the licensor’s remote server–the library will want to make sure that the licensor continues to provide it with equivalent access to the materials that were available when the agreement was in effect.

Example Clauses

Last updated: April 25, 2012

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