When entering into a construction contract with a client, there are many different aspects to the contract that you need to be familiar with. For most contracts, once the deal is signed you can expect that as long as you do the work properly, you will be able to complete the job and get paid as agreed unless something unusual happens. If you’re taking on a government contract, however, the “termination of convenience clause” could prevent this from happening.

A termination of convenience clause was originally developed because the courts determined that it was not in the public’s best interest to force a government agency to move forward with a contract that no longer made sense. There are many examples of when this can take place, such as when the government wants to have a facility built for a particular agency, but then that agency is shut down or consolidated. It doesn’t make sense to force the government to spend millions of dollars on a building they will no longer need.

What Happens if a Contract is Terminated?

If the government agency in question invokes the termination of convenience clause, you aren’t going to be completely out of luck. These clauses specify that the contractor is entitled to a negotiated settlement that will allow them to recover any costs and losses that incurred. This means, for example, if you have already made a non-refundable order for supplies, you’ll be compensated for the money spent. Any other reasonable expenses or costs will also be recoverable, so you won’t lose money from entering into this contract.

Termination of Convenience in Private Contracts

While almost all government contracts will include a termination of convenience clause, they aren’t nearly as common with private contracts. The courts tend to be of the opinion that if a private company enters into a contract, they should honor it, and it doesn’t hurt the public interest for this type of company to be compelled to honor their contracts. That being said, if both parties agree to have a termination of convenience clause in the contract, it will be honored. This can be used as a negotiating point by either party to help come to an agreement on the deal.

Get the Right Contract

Whether you are working out a contract with a public or a private entity, it is always important to ensure that the contract is properly written up and enforceable. Contact us to get appropriate representation for negotiating, creating, and reviewing your next contract. We’ll work hard to ensure your interests are protected throughout the entire job.