What is “termination for convenience?”

| Oct 29, 2019 | business law | 0 comments

Your business’ contracts serve as a sign of your stability, yet even within them, some may stand out. For example, having a contract with a government agency in San Jose can be a great benefit given the security that such agreements often provide. Such organizations have access to resources that ensure their existence, thus eliminating many of the concerns inherent with private companies. Yet with the advantages that come from working with a government partner also come some disadvantages. One of the most notable is their control over the viability of your business agreement.

In most cases, a contracted partner has to have cause to end its agreement with you. Not so with government entities. Per the Congressional Research Service, they are afforded the freedom to terminate contracts for their convenience. Thus, they can choose to end your formal business relationship prior to the terms of your contract expiring for reasons such as:

  • Your company not being willing to renegotiate your contract
  • Them finding another service provider (or gaining the ability to provide your services in-house)
  • An overall deterioration in your business relationship

If and when your government partner chooses to exercise its right to termination for convenience, all you can typically hope to collect from them is payment for whatever services have already been rendered along with the costs associated with ending your service.

However, do not think that seeking compensation for breach of contract is not an option in such a scenario. No company (be it a government or private organization) can enter into an agreement without the initial intention of fulfilling it. Thus, if you have evidence that the government agency you worked with initially negotiated with you in bad faith, you may have a claim to additional damages.