In This Case, "Termination" Means "I Won't Be Back"

Terminus was the Roman deity in charge of boundaries.  At the end of the old year, Romans would celebrate the festival of Terminalia in his honor.  The English word "terminate" is derived from this ancient god's name.  

"Terminate" is a term that is often used in contracts to refer the end of a contract.  Contracts, however, can end in many ways.  They may simply expire or they may be cut short by one or both of the parties.  This can lead to the question of whether allowing a contract to expire by its own terms is the same as terminating the agreement.

Oakland-Alameda County Coliseum Authority v. Golden State Warriors, LLC, Cal. Ct. App. Case No. A157688 (Aug. 18, 2020), involved a license agreement that included the following provision:

"If Licensee [the Golden State Warriors] terminates this License Agreement for any reason prior to June 30, 2027 and there is a principal balance remaining on the Project Debt and, in any year after the expiration of this License Agreement and prior to June 30, 2027 in which Licensor [the Coliseum Authority] is operating the New Arena . . . , the difference between Net New Arena Revenues . . . and the New Arena Operating Expenses is not sufficient to pay Scheduled Debt Service, then Licensee shall pay to Licensor an amount equal to the excess of Scheduled Debt Service over such difference."

The Golden State Warriors did not exercise its renewal option under the license agreement at the end of its term.  In seeking to avoid continuing servicing the debt, the Warriors argued that the license agreement had expired, not terminated.  An arbitrator disagreed, the trial court confirmed the arbitrator's decision and the First District Court of Appeal affirmed the trial court's decision. 

The Court of Appeal's decision should not be considered as holding that "terminates" always includes "expire".  The Court of Appeal found the contractual language to be ambiguous and its decision was based on the circumstances leading up to the license agreement and the evidence adduced.

"Expire" is also of Latin derivation. Ex means "out of" and spirare means "to breathe".  Thus, to expire is literally your last breath.

Tags: contract