Imagine working on a multimillion-dollar construction project. Suddenly, the project owner’s funding depletes, and they can no longer pay for the work. Or, worse, the project’s scope changes dramatically, making it impossible for you to fulfill your obligations. In situations like these, terminating the contract becomes the only viable option. But did you know that there are two types of contract termination? Understanding the difference between termination for convenience and termination for cause is crucial to protecting your business interests.
Termination for Convenience: A Get-Out-Clause
Termination for convenience allows one party to end the contract without citing a specific reason or breach by the other party. This type of termination is often included in contracts to provide flexibility in long-term agreements and protect against unforeseen circumstances that might render the project unfeasible or undesirable.
When you terminate a contract for convenience, you are essentially saying, “We are done, and we are walking away.” This type of termination usually comes with certain obligations, such as providing written notice and fulfilling any post-termination duties.
Termination for Cause: A Breach of Faith
Termination for cause, on the other hand, occurs when one party fails to fulfill their contractual obligations, breaching the agreement. This type of termination is often used when a party has committed a material breach, such as failing to pay invoices or not meeting project deadlines.
When you terminate a contract for cause, you are saying, “You did not hold up your end of the deal, so we are out.” This type of termination can lead to disputes and potential legal battles.
Know your rights
As a contractor, it is critical to understand the termination provisions in your contract. Knowing whether you can terminate for convenience or cause can make all the difference in protecting your business interests. Make sure you are prepared for either scenario by carefully reviewing your contract and seeking legal counsel when necessary. Before taking any action to terminate a contract, it is wise to consult with an experienced construction law attorney who can guide you through the process.
Terminating a contract is never an easy decision, but understanding your options can help you manage the process with confidence. Do not let contract disputes hold your business back. Stay informed, stay protected and know your rights.
