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Adeptly Guarding Your Business’s Interests

“Termination for convenience” explained

On Behalf of | Feb 23, 2021 | Business Litigation

The procurement of a new professional contract is the cause for much celebration for businesses in Missouri. Such an agreement offers the security of known that as long as a company fulfills its contractual terms, its partner remains legally bound to honor the contract.

Yet is this always the case? The common assumption when it comes to contract law is that one side must give the other cause to prematurely end their agreement. However, there may be situations where a business can walk away from a contract simply if it believes it to be in its best interest to do so.

Who can terminate contracts for convenience?

Such a benefit becomes available to a business due to the legal principle of “termination for convenience.” According to the Congressional Research Service, government agencies automatically have the right to end contracts in this way. Companies often will accept this risk, however, due to the stability such entities offer compared to private organizations.

Private businesses can also terminate contracts for their convenience, but only if their partners conceded them the right to do so during contract negotiations. Some might question why a company would offer such a seemingly prejudicial concession, yet often that may be the key to securing the business of a renowned professional partner.

What can a company collect following an early contract termination?

Typically, a company whose partner terminated their contract due to its convenience cannot press for damages for breach of contract. However. it can collect for any services already rendered, along with the costs associated with ending its work. Per the American Bar Association, it must submit a termination proposal within one year of its contract ending detailing any expenses still owed. It may include the cost of preparing that document in the proposal.

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