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Detailing the principle of termination for convenience

| Sep 28, 2020 | Commercial Disputes |

When your company enters into a contract with a new business partner in New York, you likely feel a great sense of security due to the assumption that your agreement will remain intact provided you fulfill your terms of the agreement. Yet is that assumption correct?

Like many of our past clients here at Mitchell Pollack & Associates PLLC, you likely believe that a company bound to a contract needs to have cause in order to prematurely end such an agreement. A contract no longer serving a business’s best interests often is not viewed as legitimate cause. This then prompts the question of whether a contracted party can terminate its arrangement at its convenience.

“Termination for convenience”

There is an actual legal philosophy known as “termination for convenience” which may allow your partner to end your agreement for reasons such as:

  • You not consenting to renegotiate the terms of your agreement
  • A breakdown in your business relationship
  • Your partner no longer requiring the goods or services your company offers
  • Your partner developing the capacity to meet their own needs in-house

Per the Congressional Research Service, government agencies automatically have the right to terminate business contracts for their convenience. Private companies, on the other hand, can only exercise this privilege if you conceded it to them when originally negotiating your contract.

What can you collect?

If and when your business partner terminates your contract for its convenience, you need to know what your company can collect for any services already rendered. Your now-former partner must pay you for any work already done, as well as any costs associated with ending your services. You can typically only collect damages for breach of contract if you can prove your partner initially negotiated with you in bad faith.

You can find more information on dealing with contractual disputes throughout our site.