Uniquely Louisiana

Uniquely Louisiana

What does “termination for convenience” mean?

| Jun 1, 2018

The outlook for your business in Baton Rouge may often be dependent on the strength of your contracts. Like most business owners or executives, you likely hold to the assumption that your contracted partners cannot simply end your associations at their discretion; rather, they typically must have cause for such action. However, there may be scenarios where contracted parties are able to terminate agreements “for convenience.”

Terminating a contract for convenience allows one to walk away from such an agreement if it believes it is no longer in its best interest to adhere to it. A specific cause need not be identified to terminate a contract in this scenario. When your partner does choose to do this, it is typically only obligated to pay you for those services already rendered as well as any expenses related to your having to cease operations on the project in question.

If your contracted partner is a private entity, the right to terminate your contract for convenience must be given. This is typically done by including specific language in the contract allowing for it. However, government agencies are automatically given this right.

According to the Congressional Research Service, common reasons that may cause a government agency to question its interest in your contractual agreement may include:

  •          It no longer needing the services you offer
  •          It being able to see to its service needs in-house
  •          You refusing to modify the terms on your contract
  •          Questions regarding the propriety of your contract
  •          Questions regarding your eligibility to enter into such an agreement

In cases involving both private and public partners, you may still attempt to pursue a claim for breach of contract. However, you would likely have to prove that your partner operated in bad faith when negotiating your agreement.