Most professionals who engage in contractual relationships with business partners in Oregon assume that as long as they fulfill the terms of the agreement, their partners remain legally obligated to fulfill theirs. It is only the failure of one of the contracted parties to do that which warrants the cancellation of a contract.
At least, that is a common belief. Indeed, a bulk of breach of contract claims may involve a defendant claiming cause to terminate a contract. However, a legal principle exists known as “termination for convenience,” which basically allows a contracted partner to walk away from an agreement when it believes it to be in its best interest to do so. The question then becomes “when does one cite that?”.
Causes for termination for convenience
Some common reasons cited by companies for terminating contracts for convenience include:
- One party no longer requires the goods or services addressed in the contract
- One party to the agreement refuses to renegotiate its terms
- One party to the agreement loses its eligibility to fulfill its contracted terms
- One party to the contract secures the capacity to furnish the contracted goods or services in-house
- One party no longer recognizes any value provided through the contract
- A general breakdown of the contracted parties’ collective business relationship
Eligibility to terminate contracts early
According to information shared by the Congressional Research Service, government agencies and entities automatically have the right to terminate contracts for convenience (companies are typically willing to accept this risk given the relative stability such partners offer). Private companies, however, can only legally cite termination for convenience if the terms of the contract afford that to them.