35 Survival

Desired result

As previewed in the chapter on Early Termination, you’ll want to think about specifying which provisions bind the parties even after each parties’ performance obligations expire or are terminated early.

Strictly speaking, a survival clause isn’t necessary because performance obligations cease at the termination of the agreement. But you may want to make some performance obligations ongoing, such as the confidentiality of personal information about your authorized users. The way you would do that is through a survival clause.

By contrast, structural provisions (including terms like venue and jurisdiction) should continue to bind the parties for claims arising out of acts while the agreement was in force. However, it is not always clear to a court what the distinction is between performance vs. structural provisions, and what the parties intended. The easiest and best way to avoid ambiguity about which provisions survive is to simply identify surviving provisions within the agreement—either by indicating within any given clause whether it survives, or creating a separate clause that identifies all surviving provisions. We generally agree with Uniform Computer Information Transactions Act (UCITA) § 616’s list of terms (identified below) to name as surviving termination.

What it means

Absent indication otherwise by the parties, the default rule is that performance obligations—the bargained-for obligations of a party to do something under the agreement—naturally terminate with the agreement.^[1]. Conversely, so-called structural obligations continue to be legally operative. Structural obligations include provisions relating to remedies and the resolution of disputes (e.g. forum selection clauses, arbitration provisions, limitations of damages clause, indemnification, choice of law provisions, etc.) As contract guru Corbin notes, however ^[2], far too much litigation arises over whether a provision is performance-based vs. structural and thus whether it should survive regardless of whether the parties included it in a survival clause. Accordingly, the best way to avoid this confusion and the resulting risk and expense of litigation is to spell out which performance and structural provisions the parties intend to survive contract termination. Courts will generally honor this expression of intent. ^[3]

Desired language

Subject to the limitations and other provisions of this Agreement, Sections [_____] of this Agreement, as well as any other provision that, in order to give proper effect to its intent, should survive such expiration or earlier termination, will survive such expiration or termination of this Agreement [for a period of X years after such expiration or termination].

Tricks & traps

If you set out to itemize surviving obligations, the trick is to be as comprehensive as possible. UCITA ^[4]—a model law that has been adopted only in Virginia and Maryland—explains what obligations a court should automatically deem to have survived contract termination even if not expressly mentioned in the agreement. For our purposes, UCITA’s list is a good guide for parties considering what to include—for the avoidance of doubt—in a survival clause. They include:

1. 1. a right based on previous breach or performance of the contract;

   2. an obligation of confidentiality, nondisclosure, or noncompetition to the extent enforceable under other law;

   3. a contractual use term applicable to any licensed copy or information received from the other party, or copies made of it, which are not returned or returnable to the other party;

   4. an obligation to deliver or dispose of information, materials, documentation, copies, records, or the like to the other party; an obligation to destroy copies; or a right to obtain information from an escrow agent;

   5. a choice of law or forum;

   6. an obligation to arbitrate or otherwise resolve disputes by alternative dispute resolution procedures;

   7. a term limiting the time for commencing an action or for giving notice;

   8. an indemnity term;

   9. a limitation of remedy or modification or disclaimer of warranty;

   10. an obligation to provide an accounting and make any payment due under the accounting.

Importance & risk

To avoid ambiguity and risk, parties should clearly identify both performance and structural obligations that they would like to remain in force, and (if applicable) the period of time for which they should continue to survive. Litigation over whether a right or obligation survives is too costly to risk when there is an easy drafting solution.