It is the rare construction project that actually gets completed on time, with the original, agreed-upon price point. With this knowledge, most project owners, developers, managers, general contractors, and subcontractors are used to adapting to slight changes in timeline and expectations throughout a project. Sometimes, though, a misstep during a construction project is so egregious that one party moves to terminate the construct for cause. This blog will provide a general overview of this situation.
What is the “Cause” in “For Cause”?
Generally, there are only two ways that a construction contract can be terminated: for cause or for convenience. For convenience means, essentially, that either side can terminate their obligations in the project for almost any reason. To terminate a contract for cause means that one or more parties has breached one or more terms of the contract. Examples of this include:
- Not supplying enough laborers to complete the project on the agreed-upon timeline
- Repeatedly not meeting deadlines for key benchmarks of the project
- Using materials and supplies that do not live up to the agreed-upon quality
- Not following applicable laws and ordinances
- Failure to pay contractors, suppliers, or subcontractors on time
As we briefly mentioned above, minor hiccups and inconsequential matters do not typically give rise to a termination for cause. Even one “major” failure to perform by either party may not result in a termination for cause; usually, repeated violations are what result in termination.
Termination For Cause Provision
Many construction contracts (those that were well-drafted and well-negotiated, anyway) will have particular circumstances that allow a termination for cause. Before pursuing with this type of contract termination, determine whether or not your current dispute fits into this mold. Sometimes, more than one cause may be applicable in your given situation. Also worth looking for in a contract is whether or not a notice must be sent before terminating for cause.
What is a Termination For Cause is Initiated, But Not Applicable?
Terminating a contract for cause should only be done when you are absolutely sure that you have that right. The other party could be entitled to lost profits and other damages if the termination for cause is found to be inappropriate. Other times, a termination for cause may be converted to a termination for convenience.
The general consensus among construction professionals is that termination of a contract should be the last resort if a dispute arises. If you feel that no other choice is viable, though, you need to get with a knowledgeable construction attorney to affirm your right to terminate your contractual obligations. Florida Construction Law Group has extensive experience helping clients with these types of issues; give us a call today at 305-227-4030 to discuss your options.