Can you be terminated for convenience?

by | Nov 9, 2021 | Contracts

Seems like an odd term – termination for convenience.  Whose convenience? Generally, neither party takes any comfort if an agreement has to be cancelled.  What may have started as a commonplace provision within government contracts, a termination for convenience can now be found in many private construction agreements.  

It is generally not very complicated.  A statement that the owner or contractor may terminate the agreement at any time for convenience and without cause.  It may go further and explain how each party will shut down their operations, but in the end it is a means for one party to walk away without any specific reason and without any sort of penalty.  

Sometimes it’s because the scope of work has changed and it makes more sense to go in a different direction.  Or maybe the parties are just not getting along and such a termination is easier than having to prove up some sort of breach.  Whatever the reason, terminations for convenience are here to stay.  

That said, subcontractors will want to be sure that any termination for convenience provision in their contract includes the right to receive payment for all work performed to date, all materials ordered, and on-site demobilization as well as overhead and profit to date of termination. 

Of course, a termination for convenience can’t be used in bad faith, for example to escape a legitimate liability or debt.  But as long as exercised fairly, a termination for convenience can be a useful and effective tool.  

Related Post