Termination Fee Law and Legal Definition

A termination fee is the money paid when one party wants to terminate the term of an agreement or long-term contract. Such clauses are stipulated in the agreement and provide an incentive for the party subject to them to abide by the agreement. For example, in mergers and acquisitions termination fees is defined as fees levied in the event that one party fails to consummate a merger. The company paying the fee does not receive any tangible assets in return.