Definition of Termination for Convenience
“The owner may terminate the contract at any time for the convenience of the owner and without giving reasons.” There are several standards for determining whether a termination was inappropriate for convenience. The traditional test is that a termination is inappropriate if it was made in bad faith or constitutes a manifest abuse of judgment. Since the establishment of this test, it has proved difficult to apply it, i.e. to prove that a termination was in bad faith or constituted a manifest abuse of discretion. In a 1982 case, the United States Court of Claims ruled that a termination clause could not, for the sake of expediency, be used to avoid paying the expected profits unless there was a change in circumstances justifying the use of the clause. Subsequent decisions interpreting this participation have further restricted the use of the traditional inappropriate termination test for reasons of convenience. In each contract, there is an implied commitment to good faith and fair dealing. Therefore, it can be argued that if the termination is exercised in bad faith for reasons of convenience, the termination may constitute a breach of contract. For example, if the owner has chosen to exercise the termination clause for convenience, if the project work is completed at ninety percent in order to avoid paying the balance of the profit for the remaining contract work, the termination could be considered a bad termination and constitute a breach of contract. Termination for cause is very similar to a common law violation in which a party fails to comply with its obligations. (In the case of non-commercial contracts, termination for default applies.) Termination for cause is usually a traumatic event for both parties. The contractor and the government are at risk of significant economic and time losses. Therefore, the government should only terminate a contract for cause if it has clear reasons to do so.
The government has the right to obtain various forms of damages from the contractor as compensation and may also charge the contractor for additional costs arising from the acquisition of the supply or service. Remember that as a contract professional, you don`t work in a vacuum; You are part of an acquisition team. If you are considering a possible termination, you should coordinate closely with your customers. Although a contracting authority has the unilateral power to terminate a contract, that power should not be exercised independently of the other members of the procurement team. FAR 12.403 The Government has the contractual right to terminate a contract in whole or in part because of the non-performance or improper performance of a contractor. Termination for cause only applies to commercial contracts. The government may terminate a commercial object contract, in whole or in part, for cause if the contractor fails to do the following: A convenience termination clause is a clause in a construction contract that allows either or both parties to terminate the agreement without a specific reason to do so (e.g., a breach or breach of contract). Terminations due to convenience clauses are very common in government construction contracts, but they have also become increasingly common in the private sector. Without a convenience termination clause, the party terminating the contract can in fact only terminate the contract due to a delay or breach (or any other provision of the contract).
Termination for convenience is some kind of all-you-can-eat employment or prenup. If a contract is terminated for convenience, the contract is terminated simply because a party decides to terminate the contract. It`s not necessarily due to poor performance, and it`s not because one party violated the agreement. However, termination for convenience is only an option if a contract contains a termination clause for reasons of expediency. Otherwise, the unilateral termination of a contract is just a good old breach of contract. And it`s a divorce that can be expensive. The following two sections will continue to set out exactly how the agreement can be implemented. In particular, it stipulates that after termination by the owner, the contractor must cease operations, take measures to preserve and protect the work, and terminate its subcontracts and orders. Although this version is aimed at contractors, similar clauses could easily be included in a subcontractor`s contract. Crown termination clauses allow contract employees to terminate contracts for convenience and enter into settlement agreements.
There are four basic types of convenience termination clauses used by the government. These are the long and abbreviated clauses for FAR 52.249-1 and FAR 52.249-2 for fixed-price contracts below the simplified acquisition threshold (SAT) and above the SAT respectively and the termination clause for convenience contracts for reimbursement contracts far 52.249-6.