diff --git a/docs/07_tools.md b/docs/07_tools.md
index c87b5419..ffb8552c 100644
--- a/docs/07_tools.md
+++ b/docs/07_tools.md
@@ -251,6 +251,46 @@ class GreetingTool(Tool):
             return f"{base_greeting}, {name}! How are you today?"
 ```
 
+### Error Handling in Tools
+
+When a tool raises an exception, the agent distinguishes between **fixable** and **unfixable** errors:
+
+- **Fixable errors** (regular exceptions): The error message is returned to the model, which can auto-correct and retry with different parameters. This is the default behavior for any `Exception` raised inside `__call__`.
+- **Unfixable errors** (`AutomationError`): The error propagates immediately to the caller, terminating the agent's execution. Use this for errors where retrying cannot help (e.g., missing credentials, unreachable services, invalid environment state).
+
+```python
+from askui import AutomationError
+from askui.models.shared.tools import Tool
+
+
+class DatabaseQueryTool(Tool):
+    """Queries a database."""
+
+    def __init__(self):
+        super().__init__(
+            name="database_query",
+            description="Executes a read-only SQL query",
+            input_schema={
+                "type": "object",
+                "properties": {
+                    "query": {"type": "string", "description": "SQL query to execute"}
+                },
+                "required": ["query"],
+            },
+        )
+
+    def __call__(self, query: str) -> str:
+        if not self._is_connected():
+            # Unfixable: no amount of retrying will help
+            raise AutomationError("Database connection is not available")
+
+        if "DROP" in query.upper():
+            # Fixable: the agent can rephrase the query
+            raise ValueError("Only SELECT queries are allowed")
+
+        return self._execute(query)
+```
+
 To use this tool with the ComputerAgent, you can run
 ```python
 from askui import ComputerAgent
diff --git a/src/askui/__init__.py b/src/askui/__init__.py
index 1f498108..c5349466 100644
--- a/src/askui/__init__.py
+++ b/src/askui/__init__.py
@@ -31,6 +31,7 @@
     ToolUseBlockParam,
     UrlImageSourceParam,
 )
+from .models.exceptions import AutomationError
 from .models.shared.settings import (
     DEFAULT_GET_RESOLUTION,
     DEFAULT_LOCATE_RESOLUTION,
@@ -69,6 +70,7 @@
 
 __all__ = [
     "Agent",
+    "AutomationError",
     "ComputerAgent",
     "VisionAgent",
     "AgentSettings",
diff --git a/src/askui/agent_base.py b/src/askui/agent_base.py
index e3554f28..5775a9c0 100644
--- a/src/askui/agent_base.py
+++ b/src/askui/agent_base.py
@@ -159,6 +159,8 @@ def act(
             None
 
         Raises:
+            AutomationError: If a tool raises an unfixable error that cannot be
+                auto-corrected by the agent.
             MaxTokensExceededError: If the model reaches the maximum token limit
                 defined in the agent settings.
             ModelRefusalError: If the model refuses to process the request.
diff --git a/src/askui/models/shared/conversation.py b/src/askui/models/shared/conversation.py
index c5277282..04f35371 100644
--- a/src/askui/models/shared/conversation.py
+++ b/src/askui/models/shared/conversation.py
@@ -177,10 +177,11 @@ def execute_conversation(
         self._setup_control_loop(messages, tools, settings, reporters)
 
         self._on_conversation_start()
-        self._execute_control_loop()
-        self._on_conversation_end()
-
-        self._teardown_control_loop()
+        try:
+            self._execute_control_loop()
+        finally:
+            self._on_conversation_end()
+            self._teardown_control_loop()
 
     @tracer.start_as_current_span("_setup_control_loop")
     def _setup_control_loop(
diff --git a/src/askui/models/shared/tools.py b/src/askui/models/shared/tools.py
index 6a837ae0..74912911 100644
--- a/src/askui/models/shared/tools.py
+++ b/src/askui/models/shared/tools.py
@@ -20,6 +20,7 @@
 from pydantic import BaseModel, ConfigDict, Field, PrivateAttr
 from typing_extensions import Self
 
+from askui.models.exceptions import AutomationError
 from askui.models.shared.agent_message_param import (
     Base64ImageSourceParam,
     CacheControlEphemeralParam,
@@ -384,10 +385,8 @@ def is_agent_os_initialized(self) -> bool:
         return self._agent_os is not None
 
 
-class AgentException(Exception):
-    """
-    Exception raised by the agent.
-    """
+class AgentError(Exception):
+    """Unfixable error raised by the agent that terminates execution immediately."""
 
     def __init__(self, message: str):
         self.message = message
@@ -647,7 +646,7 @@ def _run_regular_tool(
                 content=_convert_to_content(tool_result),
                 tool_use_id=tool_use_block_param.id,
             )
-        except AgentException:
+        except (AgentError, AutomationError):
             raise
         except Exception as e:  # noqa: BLE001
             error_message = getattr(e, "message", str(e))
@@ -691,6 +690,8 @@ def _run_mcp_tool(
                 content=_convert_to_content(result),
                 tool_use_id=tool_use_block_param.id,
             )
+        except AutomationError:
+            raise
         except Exception as e:  # noqa: BLE001
             logger.warning(
                 "MCP tool failed",
diff --git a/src/askui/tools/exception_tool.py b/src/askui/tools/exception_tool.py
index 2cdb7c43..96bb10c0 100644
--- a/src/askui/tools/exception_tool.py
+++ b/src/askui/tools/exception_tool.py
@@ -1,4 +1,4 @@
-from askui.models.shared.tools import AgentException, Tool
+from askui.models.shared.tools import AgentError, Tool
 
 
 class ExceptionTool(Tool):
@@ -28,4 +28,4 @@ def __init__(self) -> None:
         )
 
     def __call__(self, text: str) -> None:
-        raise AgentException(text)
+        raise AgentError(text)