Construction contracts are sometimes terminated after a breach of contract by one party. After breach of contract, construction litigation may check if the termination was proper. Sometimes, contractors gain lost profits and other damages if the termination was unlawful. The termination for convenience clause has become more popular in Idaho and around the country.
What is a termination for convenience?
Under construction law, the termination for convenience clause allows an owner to end a contract without a reason. The owner can terminate a contractor at their convenience under the new clause. In the new clause, contractors waive their rights to claims lost from improper termination. Termination for convenience stops any litigation that could occur from unlawful termination.
Details of a termination for convenience
Termination for convenience clauses have details about what fees and damages the contractor can get. A general rule allows contractor reimbursement for materials and services until the termination date. There are many adjustments for the costs of termination and overhead of the project. Termination for convenience stops contractors from claiming extra revenue after the termination date. The newer clause is a more finalized end to the owner and contractor relationship than clauses in the past.
There can still be litigation under construction law to determine what the contractor can recoup. There’s a narrow scope of recoverable claims compared to litigation in the past. Termination for convenience bars improper termination and lost profits from the case. The new clause usually favors the owner rather than the contractor.
Any owner who needs a contractor should consider having a termination for convenience clause in the contract. The clause allows the owner the ability to end working relationships without litigation. Contractors should be wary of the clause by preparing for premature endings to working agreements. There are legal options for both parties to the construction contract.
