In the past, contractors have objected to the termination of comfort clauses, as a cancelled project could result in disruption and financial consequences for their operations. There are considerable differences between the redundancy provisions. If the contractor is terminated for unjustified reasons, the owner is no longer legally required to make payments to the contractor. In addition, the owner is authorized to use the contractor`s equipment – which was on the project site at the time of the project`s completion – to complete the project. The contractor may be held liable to the owner for the costs that may be borne by the owner when the project is carried out, exceeding the price of the original or adjusted contract. These clauses are not always clearly written or understood, given the multiplicity of cases involving termination disputes for convenience. In contractual disputes, the courts try to enforce and implement the negotiations that have taken place between the parties. As a general rule, this does not imply the imvocation of additional terms, the interpretation of an ambiguous language for the benefit of the party that wants to avail itself of it, or the extension of rights beyond what is enshrined in the treaty. Therefore, the express language, contained in a convenience termination clause, is critical to how a court determines how it operates.
If the language is not clear, a complicated dispute may be the need to conduct a process to determine the outcome. This results in the intent and usefulness of a simple exit clause. From a contractor`s perspective, the exercise of a termination clause by the owner may affect the contractor`s benefit. Simply stated that if the contract is terminated for convenience, the contractor will not earn the expected profit when executing the contract. If the contract is terminated, the amount paid to the contractor cannot take back the contractor`s home office costs assigned to the contract. Terminations of convenience clauses are common in government contracts. If a contract does not contain a termination clause, termination for a little less than one reason should allow the terminated contractor to realize its losses for the project. If the parties are able to agree on a clause to navigate and balance the competing interests mentioned above, it should lead to a reduction in exposure to the risks associated with termination fees for the customer, while providing the supplier with the necessary financial protection when a customer performs a termination by right of convenience. Given the importance of this right to the client and the magnitude of the risks it poses to the supplier, if the parties can reach an agreement that balances the interests of both parties, it is useful to reconcile the parties for the duration of the contract. The next two paragraphs also specify how the agreement can be concluded. In particular, it states that in the event of termination by the owner, the contractor must cease operations, take measures to preserve and protect the work and terminate its subcontracting and orders.
While this version is intended for contractors, similar clauses could easily be included in a subcontractor`s contract. Whether the non-landlocked party is entitled to its loss of earnings for the work it would have done is a more controversial issue that the parties should discuss and agree upon when the contract is concluded. If the costs payable at the time of termination are not clearly defined in the contract, the court may be asked to rule. This may result in longer litigation and legal costs that termination could be avoidable for convenience reasons. In addition to an express declaration allowing the client or principal contractor to terminate the contract, a termination clause is generally declared out of convenience: the termination of a contractual relationship is a rigid and difficult task. If the contract contains explicit termination conditions, the contract may be terminated by this clause.