TL;DR: An accrued rights clause preserves all rights, obligations, and liabilities that have already arisen or vested before a contract terminates or expires. It ensures that termination does not extinguish debts owed, claims accrued, indemnification obligations triggered, or any other entitlements that crystallized during the contract term. Key variables include the scope of rights preserved, interaction with survival clauses, and whether the clause covers both parties symmetrically.
What Is an Accrued Rights Clause?
An accrued rights clause (sometimes called a "preservation of accrued rights" or "rights on termination" provision) states that termination or expiration of a contract does not affect any rights, remedies, obligations, or liabilities that have accrued up to the date of termination. It draws a line: everything that vested before the contract ended remains enforceable after it ends.
Consider a five-year services agreement terminated after three years. Without an accrued rights clause, the terminating party might argue that all obligations under the contract ceased at termination, including the obligation to pay outstanding invoices, honor earned commissions, or satisfy indemnification claims for breaches that occurred during the contract term. The accrued rights clause forecloses that argument.
This provision works alongside the survival clause but serves a distinct function. A survival clause identifies specific sections that continue to operate after termination (confidentiality, governing law, dispute resolution). An accrued rights clause preserves entitlements that have already crystallized, regardless of whether the underlying section survives. A party's right to payment for services delivered in Month 30 of a 36-month contract is an accrued right, not a surviving obligation.
Related terms include "vested rights," "rights accruing prior to termination," and "without prejudice to accrued rights." English law contracts commonly use the phrase "without prejudice to any rights or remedies which have accrued."
Why It Matters
Termination disputes are among the most common sources of commercial litigation. A clear accrued rights clause reduces ambiguity about what survives and what does not.
Key Elements of a Well-Drafted Accrued Rights Clause
Market Position & Benchmarks
Where Does Your Clause Fall?
Market Data
Sample Language by Position
Protective (Broad): "Termination or expiration of this Agreement for any reason shall not affect or prejudice any rights, remedies, obligations, liabilities, claims, or causes of action of either Party that have accrued as of the effective date of termination or expiration, including without limitation: (a) the obligation to pay all amounts due for goods delivered or services performed prior to termination; (b) any indemnification obligation arising from acts or omissions occurring prior to termination; (c) any license or right expressly granted on a perpetual or irrevocable basis; and (d) any claim for breach of a representation or warranty made during the term."
Market Standard: "The termination or expiration of this Agreement shall be without prejudice to any rights, obligations, or liabilities of either Party that have accrued prior to the date of termination or expiration. This Section is in addition to, and does not limit, the provisions identified in Section [X] (Survival) as surviving termination."
Minimal: "Termination of this Agreement shall not affect any accrued rights or liabilities of either Party."
Example Clause Language
These examples show accrued rights provisions in different agreement types.
SaaS Subscription Agreement: "Upon termination or expiration of this Agreement: (a) all rights granted to Customer under this Agreement shall cease, except as expressly provided in the Survival section; (b) Customer shall pay all fees accrued through the effective date of termination, including fees for the billing period in which termination occurs; and (c) the termination shall not affect any right or claim arising from a breach that occurred during the Subscription Term. For the avoidance of doubt, Customer's obligation to pay fees for services rendered prior to termination, and Provider's indemnification obligations for claims arising from pre-termination conduct, shall survive termination as accrued obligations."
Distribution Agreement: "Expiration or termination of this Agreement shall not release either Party from the obligation to pay any amounts accrued or payable at the time of termination, to fulfill warranty obligations for products sold during the term, or to satisfy any indemnification claim arising from events occurring prior to the effective date of termination. Distributor shall remain entitled to sell existing inventory for a period of ninety (90) days following termination, and all rights and obligations arising from such post-termination sales shall be governed by this Agreement as if it remained in effect."
Employment Agreement: "Termination of employment for any reason shall not affect: (a) Employee's right to receive any earned but unpaid base salary, accrued vacation, and vested benefits through the date of termination; (b) Employee's vested equity interests, which shall be governed by the applicable equity plan and award agreements; (c) the Company's right to enforce the restrictive covenants set forth in Sections [X] and [Y]; or (d) either Party's right to pursue claims for breach of this Agreement occurring prior to termination."
Common Contract Types
Negotiation Playbook
Key Drafting Notes
Common Pitfalls
Jurisdiction Notes
United States: U.S. courts generally recognize that accrued rights survive termination as a matter of common law, but explicit contractual language provides certainty. The Restatement (Second) of Contracts Section 279 addresses the effect of discharge on accrued claims. Delaware courts, which handle many commercial disputes, have consistently held that termination does not discharge obligations that matured before the termination date, but they require clear evidence of accrual. In employment contexts, state wage payment laws (e.g., California Labor Code Section 201-203) independently require payment of accrued wages upon termination, creating statutory backup for the contractual provision.
United Kingdom: English law firmly distinguishes between prospective termination effects and accrued rights. The principle that termination does not affect accrued rights is well-established in case law, notably in Heyman v Darwins Ltd (1942) and more recently in Leofelis SA v Lonsdale Sports Ltd (2008). The standard English law formulation, "without prejudice to any rights or remedies which may have accrued," is near-universal in commercial contracts. English courts treat accrued rights as a default rule: termination releases future obligations but does not discharge claims already matured.
Singapore: Singapore contract law follows English common law principles on accrued rights. The Courts have recognized that termination operates prospectively and does not affect rights already vested, applying the Heyman v Darwins principle. The Contracts (Rights of Third Parties) Act (Cap. 53B) may also be relevant where third-party rights have accrued under the contract. Singapore's commercial contracts routinely include accrued rights clauses, often using the English "without prejudice" formulation.
Related Clauses
This content is for informational purposes only and does not constitute legal advice. Market data represents general trends and may vary by industry, jurisdiction, and deal size. Consult qualified legal counsel for specific contract matters.
.avif)
