Having a contract in place with a business partner provides companies in Houston with a great deal of security. This comes from knowing that all a business needs to do is fulfill its contractual terms, and its continued association with the partner is all but guaranteed.
Typically a party can only terminate a contract early if the other side to the agreement has given it cause to do so. However, there are circumstances when a contracted party can indeed walk away from a binding agreement at its discretion.
Termination for convenience
The legal term for this benefit is “termination for convenience,” and according to the Congressional Research Service, is a privilege automatically afforded to government agencies. Private companies can only cite convenience when walking away from a contract if their partners conceded that benefit to them in the contract’s terms. The reasons that a contracted partner may cancel a contract for convenience can include:
- The other partner being unwilling to renegotiate the terms of the contract
- Questions arising regarding whether the initial awarding of the contract was appropriate
- The other partner no longer being eligible to fill the contract
- The terminating partner securing the ability to provide the goods/services addressed in the contract in house
When a partner terminates a contract for convenience, typically the other partner can only collect the costs of any goods/services provided to that point, as well as expenses associated with ending its work.
Damages for breach of contract
If an aggrieved party proves that the terminating partner initially negotiated the contract in bad faith, it may also press for damages for breach on contract. Per the Judicial Education Center, such damages can include general damages (direct losses) and compensatory damages (future losses due to the breach).