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What is “termination for convenience?”

by | Jun 15, 2022 | Business Law

A great deal of excitement can accompany your company entering into a contractual partnership with a new partner in California. Such an agreement seemingly guarantees continued work and incoming revenue provided that your company is able to fulfill your contractual terms.

This confidence comes from the assumption that you must give a business partner cause to end a contract. Yet that may not be the case. A legal principle exists related to contract law known as “termination for convenience.” This allows professional organizations to essentially walk away from contracts when they believe the agreements to no longer be in their best interests. You thus need to know if and when your partner can lawfully cite this privilege.

Reasons for ending a contract early

Many might wonder why your partner would want to end your agreement if you have not given them cause to do so. Some commonly recognized reasons for citing termination for convenience to end a contract include:

  • You refusing to renegotiate the terms of your contract
  • Questions arising regarding your eligibility to provide the contracted goods and/or services
  • Your partner deciding they no longer need to goods and/or service your company provides
  • Your partner securing the ability to provide the goods and/or services internally
  • A general deterioration in your business relationship

Who can terminate contracts for their convenience?

According to information shared by the Congressional Research Service, government agencies automatically have the right to terminate contracts for convenience. A private company, however, can only cite termination for convenience to end your contract if you afforded them the right to do so during the contract’s negotiations. Some might question the wisdom in conceding such a privilege, yet that may end up being a requirement for working with a reputable business partner.