As a contractor, it seems almost counter-intuitive. As a client hiring a contractor or consultant, it is a needed tool. Termination clauses in contracts between client and worker are definitely a necessity. Whether you simply use informal email agreements, or a full scale contract, within the language, there should be a clause for how, when, where, and why the contract can or should be terminated prematurely.
To the contractor, it might seem like you’re undermining yourself by including the termination clause preemptively. You might fear that it is a sign that you are not confident in your abilities and are already providing the client a way to opt out of your services. In fact, you are doing exactly the opposite. The clause is your way of saying to the client “look, this is on the table should we feel the need to use it, but I don’t think that will ever come up.” You are being extra confident.
Interestingly, you may also want to have the clause there for your own sanity. Ask anyone who has worked as a contractor or consultant for long enough and they’ll eventually describe a terrifying client who nearly sapped all of their energy and will to work. It’s truly an unsavory scenario, but you may need to have a clause in your contract for how and when you can say you will no longer work. Remember, the power isn’t entirely in the client’s hands.
This seems a bit more obvious. The employer will want to have terms available for how they can cancel a contract for any number of reasons. Perhaps their finances change and they need to pause or cancel the project. Perhaps they are dissatisfied with the work of the current contractor or have found a more elegant solution. Maybe some kind of personal quarrel has sprung up.
All of these are valid reasons, so long as they are clearly communicated in the contract.
Most importantly, on both sides, is to agree what a cancelled contract means. Sometimes, the employer will be asked to pay a severance of sorts. Whatever the case, ensure every detail of the cessation is clearly communicated. A cancelled contract does not mean a cancelled relationship.