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What is “termination for convenience?”

On Behalf of | May 31, 2021 | Contracts

Securing a contract is a noteworthy event in the life of any business in Oregon. This is especially true if your company’s new contract is with a government partner. Such entities typically offer greater stability than businesses in the private sector. Therefore, some may say your relationship is a virtual guarantee of continued work (and consistent revenue).

Yet for all of the perceived perks that come with working with government agencies, there are also unique risks. Chief among these may be the special privileges they enjoy when it comes to contractual relationships. One of these (which you may not currently know of) the benefit of “termination for convenience.”

Terminating contracts without cause

This legal principle allows a contracted partner to walk away from its agreement with you in any scenario in which it believes it to be in its best interest to do so. This conflicts with the standard assumption you and many others may have regarding contract law (that being that you must give a contracted partner cause to end your relationship).

According to information shared by the Congressional Research Service, government agencies inherently have the right to terminate contracts at their convenience. Some of the common reasons cited for exercising this right include:

  • Them securing the ability to provide the goods or services you offer in-house
  • You refusing to renegotiate the terms of your contract
  • Questions arising as to your eligibility to service the contract
  • A general breakdown in your business relationship

Understanding the legal recourse available to you

If and when your government partner ends your contract for its convenience, you can typically collect money owed for any services already rendered (as well as compensation for expenses associated with ending your service). Damages for breach of contract may only be an option if you can prove bad faith on your partner’s part.