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What is “termination for convenience?”

On Behalf of | Jul 28, 2020 | B2B Commercial Law |

When your business enters into a contract with another company in Galveston, you no doubt feel a certain sense of security from the knowledge that your partner cannot simply walk away from your agreement unless you give them cause to do so.

Yet is that truly the case? There is a legal concept known as “termination for convenience” which allows companies to end contracts if they believe it to be in their best interests to do so. The question then inevitably becomes which companies have this luxury, and what your business can collect if a partner ends an agreement in this way.

Who can end a contract at their convenience?

According to information shared by the Congressional Research Service, government agencies have the right to cite termination for convenience automatically (this includes federal, state and municipal entities). Some of the common reasons cited for doing so may include:

  • A general deterioration in your business relationship
  • The agency securing the ability to provide the goods or services you offer in house
  • You not agreeing to renegotiate the terms of your contract

Private companies, on the other hand, can only enjoy the benefit of this legal principle if you agree to give it to them during contract negotiations. It may seem counterintuitive to do so, yet such a benefit may be the key to you securing an agreement with a highly reputable or well-renowned business partner.

Collecting following the premature termination of a contract

If a partner can and does cite termination for convenience to end your contract, you typically can only collect those assets owed to you for services already rendered (as well as the expenses associated with ending your service). Damages for breach of contract are only available to you if you can show that the client initially negotiated your deal in bad faith and never intended to see it through.