Bruce Jervis, Editor
Construction Claims Advisor
A termination for convenience clause gives a project owner broad discretion to abandon all or a portion of a project, without breaching the contract, for almost any reason. The contractor, who is not in default, is supposed to be made whole. The contractor is entitled to payment for all work performed prior to termination, as well as termination costs such as subcontractor settlements and demobilization. But the contractor cannot recover breach of contract damages such as anticipated profit on the deleted work.
There are limits, however, to a project owner’s discretion in terminating for convenience. In a recent case, a federal agency constructively terminated a large portion of the contract work in order to get a better price from another source. This was ruled an abuse of discretion and a breach of contract. The contractor was entitled to the lost profit it could prove on the terminated work.
I'd like to hear your experiences with convenience terminations. Are contractors truly made whole in this situation or does it usually result in an actual loss? Do project owners exercise the right for legitimate reasons or is it a tool for manipulating the scope of work and the cost?
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