If you’re a contractor that owns a construction company that has been hired for a project, there may be a time when you need to terminate your relationship with the other party. This could happen for a number of reasons, such as financial trouble, disputes regarding time and quality, or an unhappy relationship with the other party. With these reasons come the risks of terminating a construction contract.
As a Lakeland construction attorney, we recommend that contract termination be used as a last resort. However, if a contract termination becomes necessary, it’s imperative that contractors follow the termination provisions in their contract down to the last letter. A contract termination will end the contractual rights and obligations of one or both of the parties before completion of the project, which is why it’s essential for contractors to include in their construction contracts detailed provisions that outline the conditions of a party terminating the contract.
There are two different types of contract terminations, “for cause” and “for convenience.” To view the second half of this article, please visit Part 2.
Termination for Cause
A termination for cause can only take place if one party cannot completely fulfill their contractual duties. An example of this would be a contractor terminating their contract for cause because the owner failed to pay them in the time that was determined in the contract. However, an owner could also terminate a contract for cause if the contractor cannot perform the work in accordance to the timeline in the contract.
Termination for Convenience
A termination for convenience, however, is when a contract is terminated when there is no contract breach made by the other party. Instead, a termination for convenience is only legal when it is expressly written in the contract. A termination for convenience clause tends to be added in contracts because it allows for both parties to end their responsibilities in a way that does not lead to litigation or harm of either party. It will allow for the contractor to collect any payments for completed work, as well as the owner being able to dodge paying damages for terminating the project.
Terminating a construction contract is is always a risky move. It is important that you seek the counsel of your Lakeland construction attorneys who are experienced in contract law and terminations.
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.