A PPP arrangement would ideally need to include detailed provisions dealing with its termination. The main issues to be addressed in termination are the circumstances in which the agreement may be terminated by a party ahead of its scheduled expiry; the payment (if any) that must be made by the public entity to the private partner upon termination (depending on the circumstances); and the condition of the assets when they are "handed over" to the public entity following termination. In addition to the above, the procedure involved in termination of the agreements also is usually set out in the agreement. It is to be noted that Part V, Article 34 of MCA for development of National Highways sets out conditions pertaining to 'Force Majuere and Termination'.
The typical grounds for termination include expiry of the PPP arrangement, default by the private partner, default by the public entity, a voluntary decision by the public entity and termination in the event of prolonged force majeure. The agreement must state in detail the circumstances that allow a party to terminate the agreement, in particular where the other party has defaulted on its obligations.
For it to lead to termination, a breach of agreement has to be fundamental in nature and should (where possible) be subject to "cure periods". For instance, the public entity would normally be entitled to terminate the PPP agreement in the event of insolvency or bankruptcy of the private partner or of a serious deficiency in the service provision (e.g. where health or safety is jeopardised) that is not promptly remedied. A detailed list of all the breaches that entitle termination should be set out in the PPP agreement.