In the construction industry, it’s not uncommon for contractors to be in a situation where they are forced to terminate their relationship with another party. There are multiple reasons that can cause termination, such as disputes over time and quality, or even just an unhappy relationship with the other party. As Tampa construction attorneys, we understand that, while sometimes necessary, contract termination should be used as a last resort. If it becomes apparent that a contract termination cannot be avoided, it’s vital that contractors strictly follow the termination provisions provided in their contracts.
There are two different types of contract terminations, “for cause” and “for convenience.” In this article we will be discussing termination for convenience.
What is Termination for Convenience?
A termination for convenience is when a contract is terminated when there is no contract breach made by the other party. It’s important for contractors to remember that a termination for convenience is only legal when it’s specifically written into the contract. As Tampa construction lawyers, we are aware that termination for convenience clauses are typically added to contracts because it will allow for both of the parties involved to end their responsibilities in an agreed upon way to avoid it leading to litigation, something that can hurt both of the parties.
With a termination for convenience clause in a contract, the contractor is usually allowed to collect payment for finished work. The contractor can also recover any reasonable expenses of termination (i.e., demobilization costs and penalties for terminating other subcontracts).
A termination for convenience is not only beneficial for the contractor, but for the owner as well. This is because the contractor will not be permitted to receive any anticipatory profits resulting from the terminated work. Both parties will be able to walk away satisfied.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.