Termination and dissolution of contracts: what you need to know

Gepubliceerd op 22/07/2025

Contractual relationships can come to an end for various reasons. Two key ways this can happen are through termination and dissolution. Although these terms are sometimes used interchangeably, they have very different legal meanings and consequences. In this article, we explain both concepts.

1. WHAT IS TERMINATION?

Termination is a unilateral declaration of intent by a party to end a reciprocal contract prematurely, independently of any fault. This legal act allows a party to end the contractual relationship on their own initiative, without requiring any breach by the other party.

An important feature of termination is that it only has effects for the future. This means that the contract is not retroactively dissolved, but merely ends from the moment of termination or after a certain notice period.

A key consequence of termination is that any damages suffered by the other party as a result of the termination are, in principle, not eligible for compensation, unless the termination was exercised unlawfully or abusively. This contrasts with dissolution, where damage caused by a contractual breach can indeed be claimed. It is therefore essential that parties carefully consider whether termination or dissolution is more appropriate, depending on the specific circumstances and their objectives.

2. WHAT IS DISSOLUTION?

Dissolution is the right of each contracting party to terminate a contract with immediate effect when the other party commits a serious contractual breach. In such case, the aggrieved party may not only end the contract but also claim compensation for the damage caused by the breach.

Unlike termination, dissolution of a reciprocal agreement always requires a sufficiently serious fault by the other party. Dissolution generally operates retroactively, meaning the parties are placed back in the position as if the contract had never existed.

There are three forms of dissolution:

• Judicial dissolution: the creditor asks the court to dissolve the contract due to a serious breach by the other party;
• Dissolution via an express resolutive clause: the contract contains a pre-agreed clause that sets out in which cases the contract may be terminated without court intervention. The debtor may still submit the decision for judicial review;
• Extrajudicial dissolution by notification: even without a specific clause or prior judgment, the creditor may terminate the contract by notice, provided certain conditions are met. Here too, the debtor retains the right to have the lawfulness of the dissolution reviewed by a court.

3. DIFFERENCES BETWEEN TERMINATION AND DISSOLUTION

4. CONCLUSION

Termination and dissolution are two fundamentally different ways to end a contractual relationship, each with its own requirements and consequences. Termination involves a unilateral decision affecting the future, while dissolution is based on a breach and often has retroactive consequences.

For entrepreneurs, it is essential to understand these differences and to follow the correct procedure. Carefully drafting termination and dissolution clauses in your contracts can help avoid future problems. Moreover, a well-considered approach to ending agreements can not only prevent legal disputes but also preserve business relationships, even when specific collaborations come to an end.

Do not hesitate to consult a legal expert if you are uncertain about the correct approach. Our team of specialized lawyers is happy to help you take the right steps.