Partnership for the Good of Your Business

What is “termination for convenience?”

On Behalf of | Nov 13, 2020 | Contract Disputes |

Entering into a new contract with a business partner provides your company with a good deal of security. This comes from the assumption that as long as your company adheres to the terms of the agreement, your partner will not be able to end your agreement prematurely.

However, is that truly the case? There is a legal principle known as “termination for convenience,” which allows companies to end business agreements simply when they believe it to be in their best interests to do so. The question then becomes which companies can do this (and what you may recover should your business partner try to end your contract for convenience).

Who can terminate contracts for convenience?

According to the Congressional Research Service, government agencies are automatically afforded the right to terminate contracts for convenience. Typically, agreements with such entities are attractive due to the stability they offer compared to private companies. Having the potential of them walking away from the agreement at essentially their leisure may simply be something you have to deal with ion in order to do business with them.

Private companies, on the other hand, can only cite termination for convenience if you afford them that right when negotiating your contract. Such may be a concession you find yourself willing to make in order to work with a reputable partner.

What can you collect?

If your business partner chooses to lawfully end your agreement for its convenience, then you typically can only collect for goods or services already provided up to that point. If, however, you are able to show that your partner negotiated your agreement in bad faith (and never intended to allow the contract to fully play out), then you may have the basis for a claim of breach of contract.


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