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Government agencies terminating contracts for convenience

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Entering into a contract with a new business partner in Aventura often rewards companies with a strong sense of security. This is due to the assumption that all a company needs to do is fulfill its obligations set forth in the contract in order to guarantee themselves continued work and revenue.

That security may feel even stronger when the newly contracted partner is a government agency (as such organizations often enjoy more commercial stability than private companies). Yet what many companies may not realize is that they make a trade-off for such stability: the potential of their contract prematurely coming to an end.

What is termination for convenience?

The legal principle of “termination for convenience” essentially allows a company to walk away from a contact whenever it believes it to be in its best interest to do so. In such a situation, the company does not need to have cause in order to end the agreement. Thus, their partner may not have the option of seeking damages for breach of contract should the company choose to exercise this right.

According to information shared by the Congressional Research Service, the right to terminate contracts for convenience is automatically afforded to government agencies. Common reasons such entitles may give for exercising this right may include:

  • Their partners refusing to renegotiate the terms of their contracts
  • A general breakdown in their business relationships with their partners
  • The entities securing the ability to provide the products/services their partners offer themselves

What can a company collect?

If and when a government agency ends a contract for convenience, the Code of Federal Regulations states that its partner can collect expenses for all completed services or goods provided up to that point. It can also request compensation for any costs associated with ending its services.