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What is “termination for convenience?”

On Behalf of | Nov 2, 2020 | Business Law |

Like many business owners or executives in Massachusetts, you may believe that the only way a contracted partner can prematurely terminate its relationship with your company is if you provide them with cause to do so. Yet that is not the case. Indeed, a legal principle exists known as “termination for convenience,” which essentially allows contracted parties to walk away from a business agreement when they believe it to be in their best interest to do so. 

The question then becomes what companies have the right to do this, and what your company can recover if a partner ends an agreement with you in this way. 

Affording the right to terminate contracts for convenience

Government agencies automatically have the authority to terminate business contracts for their convenience; private organizations can only do it if you concede that right to them when negotiating a contract. Some might wonder why you would offer such a right. While certainly something that deserves careful through, affording a potential business partner to right to cite termination for convenience could help you in securing the business of a reputable partner from whom your business could derive a considerable benefit for your association alone. 

Your business partner could also opt to only terminate a partial portion of your service for its convenience. In such a case, you would want to review all elements of the terminated service to ensure you are not providing more than what your amended compensation merits. 

Recovering costs following a termination for convenience case

Speaking of compensation, you of course will want to ensure you receive everything warranted if your pattern ends your contract early. According to the American Bar Association, you need to detail this in a termination proposal. This should include costs for services rendered, expenses associated with the termination and reasonable settlement costs.