Terminating contracts for convenience

On Behalf of | Jul 3, 2020 | Contract Disputes |

Companies in Cincinnati no doubt feel a great sense of security due to the contracts they may have with their business partners. Typically a contracted partner needs to have cause in order to get out of a binding business agreement. Walking away simply because it believes the agreement to no longer be in its best interests is simply not an option. 

Or is it? There indeed is a legal philosophy known as “termination for convenience” that allows companies to end a contract without having cause. When and under what circumstances a company can exercise this right is important for any company that deals contractually to know. 

Government agencies vs. private companies 

According to information shared by the Congressional Research Service, all government agencies have the option to terminate contracts for their convenience. Even disagreements such as failures to renegotiate a contract may lead to such an entity exercising this privilege. Some might wonder why, then, would a company agree to enter into a contract with a government agency. Typically such organizations offer a great deal of stability (given they have the backing of federal sponsors or state and local municipalities). The exchange for this stability is the potential that the agency can walk away from an arrangement at any time. 

Conversely, private companies can only terminate a contract for convenience if their partners agree to give them this right during contract negotiations. Otherwise ending a contract without cause may result in a case of breach of contract. 

Collecting damages for breach of contract 

The Judicial Education Center states that in cases of breach of contract, the aggrieved party can typically seek two distinct types of damages. Compensatory damages serve to compensate a company for the work and resources expended in executing the contract. The goal of punitive damages, on the other hand, is to punish the accused party for their actions. 

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