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Terminating contracts for convenience

On Behalf of | Dec 21, 2017 | Construction Disputes

You likely feel a good level of comfort from knowing that, as a contractor in Austin, your work is secured contractually. This puts you in control of your company’s destiny, ensuring that as long as your team is able to meet its obligations, you partner cannot simply back out of your agreement (at least without facing any penalties). Many contractors and companies that we here at Wright & Greenhill PC have worked with in the past have shared this same assumption. However, the law does allow certain parties (government entities in particular) a fair amount of leeway when it comes to getting out of contracts.

Terminating a contract “for convenience” basically allows a contracted partner to walk away from a deal without cause. According to Federal Acquisition Regulation 52.249-2 (as shared by the Legal Information Institute of the Cornell University Law School), a government entity can terminate a contract with you if it believes that doing so is in its best interest. If you are contracted with a government partner and it exercises this right, you are only then entitled to collect whatever you are owed for the work done up to that point, as well as whatever costs are associated with ending your involvement with the project in question. Recovering damages for breach of contract is only possible if you are able to show that the government operated in bad faith when executing your original agreement.

For the government to end your contract in this way, a termination for convenience clause must be present in your contract. Private entities are also increasingly trying to include such language in their contracts in order to enjoy the same privilege. You can learn more about contractual provisions related to construction contracts by continuing to browse through our site.