Reviewing the right of “termination for convenience”

| Oct 30, 2020 | business law | 0 comments

After coming to an initial agreement on an ongoing business relationship with a long-sought-after client in San Jose, you may rest easy with the assumption that your new partner remains locked into your agreement as long as your organization fulfills its terms.

Such was the belief of many of our past clients here at Lawrence R. Jensen & Associates. Yet just as they did, you may come to learn that the complexities of contract law offers more freedom than you realize. Indeed, there may actually be scenarios where a contracted partner can walk away from an agreement simply because it believes it to be in its best interest to do so.

Citing “termination for convenience”

Some of the common reasons why your partner may want to terminate its contract with you for its convenience may include:

  • Your company refusing to renegotiate the contract’s terms
  • Questions arising as to your company’s continued performance
  • It securing the ability to provide the products and/or services your company offers “in house”

According to the Congressional Research Service, government agencies inherently have the right to terminate business contracts for their convenience. If such a partner does end an agreement in this way, you can typically only collect for those services your company has already rendered (unless you can show that the agency initially negotiated with you in bad faith).

Conceding the right to terminate a contract for convenience

Private companies, on the other hand, can only cite termination for convenience if you afforded them the right to do so when negotiating your contract. You might immediately scoff at the idea of making such a concession, yet that ultimately could be the price to pay for working with a well-respected partner in your sector. You should not make such a decision, however, without careful consideration.

You can discover more information on the nuances of contract law throughout our site.