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What can happen on a Termination for Convenience Clause?

New YorkNotice of Termination

Dear Sirs. On a current project were I am involved as Project Manager from Supervisor side, we have these Contractual Clauses that states the following: "Clause A: Notwithstanding the above, the Employer may terminate the contract for convenience." "Clause B: If the Contract is terminated for the Employer´s convenience or because of a fundamental breach of Contract by the Employer, the Supervisor Consultant shall issue a certificate for the value of the work done, Materials ordered, the reasonable cost of removal of Equipment, repatriation of the Contractor´s personnel employed solely on the Works, and the Contractor´s costs of protecting and securing the Works, and less advance payments received up to the date of the certificate." Client wants to terminate the Contract at his convenience, and our concern is that , the clause B is a valid clause or it can be challenged by Contractor at the Arbitration requesting for loss of profits or any other monetary claims. Note: both parties waved going to Civil Courts meaning the Arbitration Tribunal is mandatory. Thank you in advance for your insight Best regards Mário Morais

1 reply

Oct 3, 2019
Based on the above information, that sounds like a relatively standard termination for convenience clause. While an owner or other party may be entitled to terminate their contract for convenience, that doesn't mean the termination will be cost-free. In fact, there are often more costs associated with winding down a relationship when a termination for convenience has taken place than when a contract is terminated for cause. In either event - if the contract sets out specific amounts that must be paid upon termination for convenience, then those amounts should be paid if the contract is terminated for convenience. And, those payments will typically be offset by whatever payments have already been made in excess of what's owed for work performed or materials purchased. For a little more background on termination clauses, here are some great resources: (1) Termination for Convenience | Can Your Customer Terminate You Without Good Reason? (2) How a Termination Clause Works in a Construction Contract (3) Termination for Cause | When Can Construction Contracts Be Terminated for Cause?
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