Contract Termination, including Termination for Convenience

Tuesday, March 1st, 2016

‘Termination for Convenience’ provision is a contract clause allowing one party to unilaterally terminate a contract even in the absence of the other party’s breach. This contract provision is increasingly included in Council contracts, largely because there may be occasions when central government decide that some services will no longer be provided. There may be other circumstances when the convenience clause will be helpful to a Council, such as when the existing supplier’s costs outstrip those available elsewhere. Generally, the buyer will not permit the supplier to have a provision whereby the latter can terminate for convenience.

There should be a termination provision in all contracts. That is good practice. The detail of termination clauses will require the advice of legal services specialists to ensure the provision is robust. At the least the following provisions should be included:

       Termination for convenience by the Council

       Termination on Council Default

       Termination on Contractor Default

       Termination for persistent breach by the Supplier

       Termination on corrupt gifts and fraud

       Termination on Force Majeure

       Compensation on termination for Council Default/C


       Compensation on corrupt gifts and fraud

       Compensation on termination for Supplier default

       Miscellaneous Compensation provisions

       Method of Payment

       Consequences of Termination

The termination of a contract for ‘Convenience’ cannot be lightly undertaken. It is highly probable that compensation will be required when termination is applied. The precise situation will depend on other contract provisions. For example, the supplier may have committed resources to the performance of the contract and cannot redeploy those resources to another contract. There may also be capital assets; the cost of which was spread over the term of the contract. At termination, the financial asset recovery not achieved may require compensation by the Council.

Termination of a contract is a complex undertaking for which legal advice is required.

This article is not intended to be legal advice that can be acted upon. You are advised to seek legal and professional advice prior to taking any actions related to the above content.

© Dr Brian Farrington, February 2016