Model clause

Carbon Termination (Short Form)

Annie's Clause

A clause that allows a right of termination for a customer so that they can pivot to a greener supplier to meet their sustainability, climate or other environmental objectives.

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Why use this?

Many businesses sign long term supply or other business relationships in order to achieve certainty and value. However, once tied in it is often difficult to terminate without financial consequence. This becomes a problem if a business or organisation has stated a net zero target or declared a climate change emergency and the incumbent counterparty is either a high carbon user or not aligned with a customer’s objectives.

If a supplier is “greenwashing” and this becomes publicly acknowledged, then this will reflect on the customer and becomes a reputational issue as well.

The proposed amendments will mean that a contract can be terminated in a narrow set of environmental circumstances. The requirement of good faith and reasonableness may help to ensure that the clause is only used to meet climate goals and not for commercial convenience.

How it promotes a net zero future

The clause will allow a customer the ability to move suppliers in order to achieve its environmental aims. This should increase the likelihood of achieving net zero and other environmental targets that are set.

It should also mean that the incumbent supplier will seek to ensure that it improves its carbon footprint and sustainability to ensure the contract is not terminated.

Disclaimer - please read

The clauses on this website (and published in our Climate Contract Playbook) have been prepared in good faith on a pro bono basis and are free to download and use. The clauses have been drafted and edited by a variety of lawyers and, as such, the approaches to drafting may not conform to any particular drafting norms. We acknowledge this as a consequence of the collaborative drafting process.

The clauses on this website (and published in our Climate Contract Playbook) are provided on an ‘as is’ basis and without any representation or warranty as to accuracy or that the clauses will achieve the relevant climate goal or any other outcome.

This website (and the Climate Contract Playbook) does not comprise, constitute or provide personal, specific or individual recommendations or advice of any kind, and does not contain legal or financial advice. The clauses are precedents for legal professionals to use, amend and negotiate using their professional skill and judgement and at their own risk.

While care has been taken in the drafting of these clauses, neither The Chancery Lane Project nor any of its contributors owe a duty of care to any party in relation to their preparation and do not accept any liability for any errors or omissions, nor for any loss incurred by any person relying on or using these clauses or any other person. Users should use their own professional judgement in the application of these clauses to any particular circumstance or jurisdiction or seek independent legal advice.

At present, all the clauses are based on the laws of England and Wales. We encourage the conversion of these precedent clauses for use in other jurisdictions.

The clause

Green Termination

1.1 Without affecting any other right or remedy available to it, the Customer may terminate this agreement by giving [1 month OR [NUMBER] month’s] written notice to the other party:

(a) if the Customer, [acting in good faith OR having made a reasonable comparison of the Supplier and other available suppliers], has decided to switch to an alternate supplier to achieve a reduction in the carbon footprint or emissions attributable to the Customer as a result of the Supplier’s performance of the agreement, provided:

  • the potential reduction is [supported by reasonable evidence and is] at least [PERCENTAGE]% less than the carbon footprint or emissions relating to this agreement at the time of the comparison [(with that calculation meeting the requirements of [INSERT CARBON MEASUREMENT METHODOLOGY USED BY THE CUSTOMER])]; [and]
  • the proposed obligations of the alternate supplier are at least as onerous as those of the Supplier under this agreement; [and]
  • [the proposed price of the alternate supplier is not significantly different to the price of the Supplier in aggregate over an equivalent period;]

(b) if the Supplier’s environmental practices or negative environmental impacts may bring the Customer’s reputation materially into disrepute as a result of conflicting with the Customer’s published [net zero/carbon reduction] targets from time to time; or

(c) if the Supplier acts persistently and materially in such a manner as [to reasonably justify the opinion that its business operations or other conduct] is inconsistent with good environmental practice and policy [, as exemplified in [INSERT INDUSTRY ACCEPTED GUIDANCE OR STANDARD]]; or

(d) if the Supplier fails within [30] days to respond fully to a request for information made by the Customer to allow the Customer to assess the carbon footprint, emissions, environmental practices and policies of the Supplier that relate to activity under this agreement.

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