- A default is simply a failure to do something the contract requires — paying on time, delivering goods that meet specifications, maintaining required insurance, or performing any other…
- A cure period exists to prevent a contract from being terminated over a problem that could reasonably be fixed, and to give both sides a predictable process instead of a unilateral,…
- A party fails to meet an obligation under the contract.
When one side of a business relationship falls short — a late payment, a missed delivery, a service that isn't performing as promised — the other side's instinct is often to end the contract immediately. Many commercial contracts don't allow that. Instead, they require a notice-and-cure process: a formal warning and a defined window to fix the problem before the contract can actually be terminated.
Understanding how these clauses work matters on both sides of a deal. If you're the one considering termination, skipping a required cure period can turn you into the breaching party. If you're the one who fell short, a cure period may be the only thing standing between a fixable mistake and losing the contract entirely.
What Is a "Default" Under a Commercial Contract?
A default is simply a failure to do something the contract requires — paying on time, delivering goods that meet specifications, maintaining required insurance, or performing any other defined obligation. Not every default is treated the same way: contracts often distinguish between minor, easily fixed issues and defaults serious enough to threaten the whole relationship, sometimes labelled "material" defaults. How a contract defines and categorizes defaults directly affects what happens next.
Why Cure Periods Exist
A cure period exists to prevent a contract from being terminated over a problem that could reasonably be fixed, and to give both sides a predictable process instead of a unilateral, immediate cutoff. From a drafting perspective, cure periods:
- Reduce the risk of disputes over whether termination was justified.
- Give the defaulting party a genuine chance to correct course, preserving a relationship that may still be commercially valuable.
- Create a documented record — the notice, the response, whether the cure happened — that matters enormously if the dispute ends up in litigation.
How a Notice-and-Cure Clause Typically Works
- The default occurs. A party fails to meet an obligation under the contract.
- Written notice is given. The non-defaulting party formally notifies the other side, describing the specific default in enough detail that it can actually be addressed.
- The cure period runs. A defined window, set out in the contract, during which the defaulting party can fix the problem.
- The default is either cured or it isn't. If it's fixed within the window, the contract continues as normal; if not, the non-defaulting party generally becomes entitled to terminate.
- A termination notice follows, if applicable. Typically a separate, further notice confirming the contract is now being terminated because the cure period passed without resolution.
Skipping any of these steps when the contract requires them is a common, and costly, mistake.
What Counts as a "Material" Breach?
Contracts frequently limit the right to terminate, as opposed to simply claiming damages, to breaches that are "material" — serious enough to go to the heart of the deal, as opposed to a minor or technical slip. Whether a given failure is material is not always obvious from the contract's wording alone, and disagreements over this point are a frequent source of disputes. Well-drafted contracts try to reduce this ambiguity by listing specific examples of what counts as material for that particular deal, such as non-payment past a certain point, repeated late delivery, or loss of a required licence or insurance.
What Happens If You Skip the Cure Period?
If a contract requires notice and an opportunity to cure before termination, and a party terminates without following that process, the termination itself may be invalid, potentially exposing the party who jumped straight to termination to a claim for wrongful termination or repudiation, even if the underlying default was real. Before sending a termination notice, it is worth confirming exactly what process the contract requires and following it precisely, including how notice must be delivered and how the cure period is calculated.
Drafting Tips for Notice-and-Cure Language
- Be specific about notice delivery — email, courier, registered mail — and when notice is deemed received.
- Set a realistic cure window for the type of default involved; a payment default may reasonably need a shorter window than a complex performance issue.
- List examples of what counts as an incurable default, such as insolvency, that can bypass the cure process entirely.
- State clearly what happens if the cure period passes without resolution — does termination happen automatically, or does it require a further notice?
Frequently asked questions
Can we terminate immediately if the other side's failure seems serious enough?
Only if the contract allows it, or if the failure is so fundamental that it amounts to a breach going to the root of the agreement under general contract principles. If the contract specifies a notice-and-cure process for the type of default involved, skipping it is risky even where the underlying complaint is legitimate.
What if the other side "fixes" the problem but it happens again later?
Contracts sometimes address repeated defaults specifically, for example by treating a second occurrence of the same issue within a set period as automatically incurable. If your contract is silent on this, each instance is typically evaluated on its own under the general notice-and-cure process.
Does a cure period apply to every kind of default?
No. Many contracts carve out certain defaults, like insolvency, a serious breach of confidentiality, or loss of a required licence, as immediately terminable without any opportunity to cure, because those situations aren't realistically fixable within a short window.
We received a default notice. What should we do first?
Read the notice and the underlying contract clause carefully to understand exactly what is alleged, how much time you have to respond, and what curing the default actually requires. Responding promptly and in writing, and getting legal advice quickly if the stakes are meaningful, protects your position either way.
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