Kill fee vs cancellation fee

Two related but distinct contract terms: a kill fee typically compensates for work-in-progress and lost opportunity cost when a project is stopped mid-engagement, while a cancellation fee more narrowly reimburses specific committed costs (like non-refundable third-party spend).

Example

A contract might include both: a kill fee of 25% of remaining project value if the client cancels mid-project, plus a separate cancellation fee equal to any non-refundable ad spend or software licenses already committed on the client's behalf.

Why it matters for agencies

Agencies that use only one term, or use the terms interchangeably without defining either precisely, often find the clause doesn't hold up well in a real cancellation dispute — precision here is what makes the clause enforceable rather than just a gesture toward being protected.