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What can you collect in a termination for convenience case?

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Past posts on this blog touched upon the fact that government agencies in Florida automatically have (and permitted private organizations also have) the right to terminate business contracts at their convenience. Such an action likely comes as quite a shock to you and your company, given that the very nature of it implies that there were no apparent actions (or inactions) on your company’s part that gave cause for it.

Still, now that you know the potential exists, it becomes imperative for you to know what to do should you receive the news that your partner plans to exercise this right.

Preparing a termination proposal

According to the American Bar Association, should your business partner terminate your contract for its convenience, you must prepare and submit a termination proposal within one year of that action occurring. This proposal should provide a breakdown of all expenses still owed. The majority of those will only include costs already incurred, such as the expenses for all goods and/or services your company provided. On top of labor costs, that may include any of the following expenses:

  • The cost of materials already purchased yet not yet used
  • Any rental dues for machinery leased to perform the contracted services
  • Funds due to subcontractors working on the project

Collecting for post-termination expenses

You can also collect any costs associated with ending your services (including the legal expenses associated with preparing your termination proposal). This may also include any early termination fees associated with equipment lease agreements you must pay due to the termination.

Many in this position often ask if it is possible to seek damages for breach of contract. That only becomes an option if you can show that your partner initially negotiated your agreement in bad faith (never intending to actually let the contract go to term).