Chadd Reynold’s article on “Termination for Convenience”
In an article published on September 20, 2022, in Construction Executive, Atlanta-based Senior Associate Chadd L. Reynolds discusses the “termination for convenience” clause in public contracts, which is permitted to terminate construction contracts in the absence of the contractor’s default. He writes that, unlike termination for cause, the right to terminate for convenience is almost never given to the downstream party and is now found in private contracts, including many of the commonly used construction contract forms.
“A typical termination for convenience clause will entitle the terminated party to receive the costs for the work it completed on the project, and maybe a portion of its lost profits or overhead, up until the date of termination,” Reynolds explains. “The types of costs to consider may include the value of all work satisfactorily performed and material stored on site, or actual, direct costs plus an allowance or percentage of profit and overhead.”
His article also outlines when to utilize termination for convenience and considerations for the terminating party.
“Before opting to terminate for convenience, inspections should occur to document the status and quality of the would-be-terminated party’s work prior to termination. The terminated party should only be paid for work it has performed, and an inspection will confirm whether any incomplete work is being included in the costs sought by the terminated party,” writes Reynolds.
To learn more, read the full article on Construction Executive here.