Who is responsible for payments if a contract is terminated? Whether you (the client/customer) have an obligation to pay when a contract has been terminated depends on the reason for termination, the timing of the termination, which party terminated the contract, and the terms of the contract. Mostly, it depends on what the contract says!
Some contracts, especially contracts for services (such as data storage, business telephone/internet bundles etc.), provide that in the event that the client wishes to terminate the contract early, the client will be obliged to pay a termination fee.
This means a party can terminate for any or no reason, effective a specified time period following provision of written notice to the other party. If the contract is terminated according to the termination clauses, then termination itself will not be a breach of the contract which requires payment of damages as compensation for the termination.
Termination Rights. Your contract should include clauses dealing with termination rights. Often the contract will provide that one or both parties have the right to terminate for cause (usually a breach by the other party) and that this termination will be effective as soon as notice of termination is given to the other party.
If the contract is terminated according to the termination clauses, then termination itself will not be a breach of the contract which requires payment of damages as compensation for the termination.
Payment clauses are usually included in the list of clauses that survive termination - any payments you were obligated to make before the contract was terminated, you’ re still obligated to make after the termination.
Many contracts contain clauses which deal with the question of whether/what payments must be made upon termination of the contract. These clauses are often closely negotiated, and the terms can vary greatly from contract to contract.
Breach of Contract. If you’re responsible for a material breach of the contract, you may be required to pay damages or liquified damages (an amount agreed upon in the contract in advance as the damage caused by the breach).
As a client, a material breach could be your failure to provide the developer with essential information required to develop your app, or your failure to make payments under the contract as they become due. If you cause a material breach and the contract is terminated as a result, you could be responsible for payment.
Most contracts will contain a ‘survival clause’ which provides that certain provisions of the contract will survive termination of the contract, meaning that they continue in effect even if the rest of the contractual obligations have been terminated.