Can a party terminate a contract at its convenience?

On Behalf of | Jun 9, 2020 | Construction Contracts |

When working on a project governed by a contract, you likely feel reasonably secure in the stability of that agreement (provided that your company fulfills its contractual obligations). Doing so does not give your contractual partner any cause to end your agreement.

What happens, then, if that partner simply wants to end your agreement because they believe doing so would be more convenient for them? You might think you have a classic case of breach of contract on your hands, yet that may not always be the case.

“Termination for convenience”

While you are probably familiar with the concept of terminating a contract with cause, you may not know that a comparable legal principle exists known as “termination for convenience.” The definition supporting this principle is just as its name implies: a party terminating a contract at its convenience. Situations where an entity might choose to end its construction contract with your company under these pretenses may include:

  • You not wanting to renegotiate the terms of your contract
  • The party believing it can do the work you provide
  • The party determining that it no longer want to proceed on the project

Per the Congressional Research Service, government agencies are automatically afforded the right to use this principle to get out of contracts. Private companies can only cite it if you afforded them that right during contract negotiations.

Your entitlement in a termination for convenience case

If a contracted partner legally ends your agreement for its convenience, you typically can only collect expenses for work your company has already done. However, if you can prove that your partner never intended to fulfill your contract (thus implying they initially negotiated in bad faith), you may be able to seek damages for breach of contract.

FindLaw Network