Contract Glossary
Sunset Clause
Definition
A provision that automatically terminates a contract, specific obligation, or law after a set date unless actively renewed. Unlike a standard termination clause that requires someone to act, a sunset clause means inaction equals expiration. The obligation dies on the specified date unless both parties affirmatively extend it.
In Practice
Your non-compete agreement includes a sunset clause stating it expires 18 months after your last day of employment. On month 19, you're free to work for a competitor without any action required — the restriction simply evaporated. Without the sunset clause, you'd need to check whether the non-compete is indefinite (often unenforceable) or tied to some other triggering event.
Example Clause
This non-solicitation obligation shall expire automatically twenty-four (24) months following the Effective Date of termination, without further action by either Party. If the Parties wish to extend the restriction period, they must execute a written amendment prior to the sunset date.
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Frequently asked questions about sunset clause
A termination clause requires someone to do something — send notice, trigger a condition, or exercise a right. A sunset clause is automatic: the obligation ends on a specific date with no action needed from either party. Termination is active; sunset is passive. Many contracts include both — a sunset clause for the overall term plus termination rights for early exit.
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Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.