A separation contract is put forwarded when two parties decide to terminate their relationship. This contract can be drawn for both business purposes and personal reasons. The business separation contracts are constructed mainly for the purpose of dividing the business into different parts so as to enable them to be controlled separately and individually by the concerned party. There may also be certain disagreements amongst the parties concerned such as low revenue generation that lead to the formulation of such a contract. However, exact reason must be stated clearly in the contract. It is also essential that details such as ratio or percentage of division of assets and liabilities, obligations to be fulfilled even after separation etc.

  • All information regarding the parties concerned should be mentioned. In case the separation is an internal one within one company, then the persons-in-charge should be stated in the contract. The party who initiates this separation and release should also be stated in the contract.
  • The reasons for the separation contract should be mentioned in a detailed and orderly way. It is very important that the party stating the reasons should be stated alongside as well.
  • The necessary actions to be taken after separation should also be explicitly stated. This will include terms and conditions that all parties will agree to so as to ensure that the contract is followed through.
  • There must also be a separate clause included in the contract which mentions any legal action to be taken in case there is any discrepancy in following the given terms and conditions.
  • There maybe certain obligations to be followed even after separation. Such duties must be mentioned clearly in the contract.
  • This type of contract should be created through the consultation of a lawyer. This will ensure unbiased formulation of the contract.

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