Kill Fee and Termination for Convenience: How to Size Them

Ten days' written notice, any reason or none. That is what clause 12.2 of the client's draft reserves: Client may terminate this Agreement at any time, for any reason or no reason, upon ten (10) days' written notice to Contractor. On the $18,000, four-month engagement the rest of the document describes, that sentence turns the contract into an option. They can walk at the end of month two — a termination for convenience — and the draft, as sent, prices the option at zero. No kill fee. Nothing.

You will probably not get the clause deleted. Convenience termination is standard client paper, and by itself it is not the problem; the nine clauses that decide whether you get paid treats it as one of the nine precisely because what matters is the sentence that follows it. This page is about that sentence — the kill fee — and specifically about the number in it. Not whether to ask. How much.

The usual caveats, stated plainly: I am not a lawyer and nothing here is advice about your agreement. Every document quoted below is linked at its source and carries the date I read it.

The clause was born with a price tag attached

Termination for convenience is a transplant from US government contracting, and it is worth knowing what the donor system pays when it uses the clause, because the answer is not nothing.

When the federal government terminates a negotiated contract for convenience, the settlement allows profit on the work actually done: FAR 49.202(a) directs the termination contracting officer to "allow profit on preparations made and work done by the contractor for the terminated portion of the contract," while "anticipatory profits and consequential damages shall not be allowed." The commercial-items version compresses the same deal into one sentence. Under FAR 52.212-4(l), the terminated contractor is paid "a percentage of the contract price reflecting the percentage of the work performed prior to the notice of termination, plus reasonable charges the Contractor can demonstrate … have resulted from the termination" — and nothing "for any work performed or costs incurred which reasonably could have been avoided." Both read on 1 September 2026 from the eCFR text of title 48.

None of that governs a logo project or a video edit; it is federal procurement law and it reaches nobody's freelance retainer. But look at the shape. Work performed, at full rate, profit included. Wind-down costs that actually resulted. Nothing for the profit you would have earned on the part that never happened. That last exclusion is the gap a kill fee exists to fill in private contracts: the government is big enough to absorb its vendors' lost expectancy, and your client is asking for the same right without the balance sheet that justifies it. A kill fee is the price of the option clause 12.2 grants. The client's draft simply forgot to fill the price in.

Two published numbers, built two different ways

Industry bodies rarely commit to figures. On this clause, two have.

The AIGA Standard Form of Agreement for Design Services (2022 update, read 1 September 2026) lets either party terminate for convenience "effective immediately upon notice" (clause 11.2). Clause 11.3 then does three things at once. It pays the designer for services performed through termination — the greater of any advance payment, a prorated portion of the fees, or hourly fees for the work done — plus outstanding costs. Where the termination was the client's convenience, it adds "an early termination fee equal to 25% of the total Project fee." And it switches off the rights grant: Schedule A "shall not be effective," and the client gets no rights to the deliverables except by written consent given after termination. Payment for the work, a fixed premium for the walk-away, and the IP held back as the enforcement mechanism. Three moving parts, one clause.

The Graphic Artists Guild publishes its model Letter of Agreement with different machinery (read 1 September 2026): "Fifty percent (50%) of the final fee is due within 30 days of notification that for any reason the job is canceled or postponed before the final stage. One hundred percent (100%) of the total fee is due despite cancellation or postponement of the job if the art has been completed." Rights revert to the artist on cancellation and original materials come back. Notice the word postponed, doing quiet work twice. A job put "on hold" triggers the same fee as a job killed — which closes the loophole every freelancer has been caught in, the cancellation that arrives dressed as a pause and never un-pauses.

So: AIGA charges a premium on top of work-to-date pay, fixed against the total fee. The Guild sets a staged floor — half before the final stage, all of it after completion — with a 30-day payment deadline attached. Different mechanics, same verdict on the client draft's implicit number.

Sizing: three losses, and only one of them is the fee's job

When a job dies in month two, you lose three distinct things, and a well-drafted termination section pays for them through three different doors.

Work in flight. Everything done since the last milestone — drafted, shot, half-edited, not yet at an invoiceable event. This is not the kill fee's job. It belongs to the work-to-date sentence: compensation for services performed through the termination date, at the contract rate. Check which version of that sentence your draft carries, because the one that pays only for deliverables accepted as of termination quietly excludes everything in flight — the trap flagged under clause 7 of the nine-clauses map. Fix that sentence before you argue about percentages; a 25% kill fee is poor consolation for donating three weeks of unbilled production.

The reserved calendar. You held ten or fifteen hours a week for this client through October, and you declined work to do it. This is the anticipatory piece — exactly what the federal rules refuse to pay and exactly what a kill fee prices. It is real money with no invoice attached to it.

The restart gap. However good your pipeline, the next engagement does not start the morning after the termination email. For most solo freelancers the honest number is two to six weeks.

Now the arithmetic on the job above. $18,000 over four months is $4,500 a month. Killed at the end of month two on ten days' notice: the work-to-date sentence (if you fixed it) covers roughly $9,000. The reserved calendar and the restart gap between them cost you something like a month — about $4,500, which is 25% of the total fee. Suddenly AIGA's number looks less like a round figure someone liked and more like a month of capacity, priced. Run the same sum on a three-week, $6,000 job and it collapses: the refill gap is days, the deposit you took is probably bigger than any defensible fee, and this is why short jobs get a deposit and a balance rather than a termination schedule — on that structure the deposit, drafted as earned on cancellation, already is the kill fee.

One drafting choice follows from that arithmetic: on smaller jobs, write the fee in dollars, not percent. A percentage is an invitation to renegotiate the base — total fee or remaining fee, before or after expenses, and clause 12 rarely says which — while a flat figure in the fee schedule, next to the word "cancellation," can be checked against the invoice without a calculator. The Guild's model keys its floor to percentages because it has to cover every job size at once; your contract covers one job, whose numbers are known at signing. Below roughly $20,000, do the month-of-capacity sum once, round it, and write the dollar figure down where the person killing the job can find it.

The fee and the notice period are the same lever

Here is the negotiating fact that makes this clause easier than it looks: a kill fee and a notice period are substitutes, because both are measured in the same unit — your unfilled calendar.

Thirty days' written notice, with work continuing and billable through the notice period, pays you about a month. A kill fee sized to a one-month refill gap pays you about a month. The client's draft, with termination effective in ten days and no fee, pays you a third of a month. So when procurement says "we never agree to penalties" — and some genuinely have a policy — the counter is not a smaller fee, it is time: extend the notice to thirty days and strike the fee entirely. Same economics, no word that triggers the policy. AIGA's own form, remember, runs the other direction: immediate termination, priced at 25%. Immediate-and-paid or slow-and-free are both livable. Immediate and free is the one you were sent.

Milestone structure moves the same lever from the other end. The tighter and more severable your payment schedule, the less work is ever in flight, and the less the termination section has to carry — with monthly invoicing, work-to-date is mostly already collected and the fee only has to cover the refill gap. How to build that schedule, and the deposit language that makes an advance "the greater of" candidate AIGA intends it to be, is worked through in deposits, milestones, holdbacks.

The three sentences to send back

Redlining clause 12.2, then, is not one edit but three sentences, each paying for a different loss:

On termination, Client shall pay Contractor for all Services performed through the termination date, including work in progress not yet delivered, at the rates in Schedule A.

Where Client terminates for convenience, Client shall additionally pay a cancellation fee of $[___] [or: [__]% of fees not yet invoiced as of the termination date], due within 30 days of notice. Postponement of the Services by Client for more than [30] days is a termination for convenience.

Client shall reimburse all non-cancellable commitments Contractor entered into for the Services before notice of termination. No rights in undelivered or unpaid-for Deliverables transfer until the amounts above are paid in full.

Adapt the defined terms to your draft; the postponement sentence is the Guild's idea and the rights-holdback is AIGA's, and both earn their place. One caution belongs with the fee itself: whether a stated cancellation fee reads as an enforceable liquidated-damages provision or as an unenforceable penalty is a genuinely legal question that turns on the law the contract chooses, and it is precisely the sentence to have reviewed by a lawyer licensed in the governing-law jurisdiction before you sign — at redline, an hour of review; in month two, a dispute. What you can decide without counsel is the arithmetic: a month of your capacity, in dollars, written where the person killing the job can read it. The draft they sent you says zero. Every sentence above is an improvement on zero.