Definition, Meaning & Synonyms

termination-fee

noun

/ˌtɜːrmɪˈneɪʃən fiː/

Definition

A termination fee is a financial penalty that one party must pay to another when an agreement or contract is prematurely ended.

Examples

If you cancel your subscription before the agreed period, you may be charged a termination fee.
The company had to pay a substantial termination fee after deciding to withdraw from the merger.

Meaning

It serves as a deterrent against breaking a contract and compensates the non-breaching party for potential losses and inconvenience caused due to the termination of the contract.