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Examining the right to end contracts "for convenience"

Having a contract with a government partner offers great security for your company. Knowing that said partner has the backing of federal, state or local resources all but ensures that you do not have to worry about it fulfilling its financial obligations. It is for these reasons why clients in Los Angeles come to us here at Chodos & Associates in such a panic when they lose their government partners. You may feel the chances of this happening to your business are slim given the protections your contractual relationship provides. Yet you might be surprised to learn how easily a government entity can get out of a contract. 

Whereas a contractual partner typically needs to have cause to terminate an agreement, government agencies are automatically afforded the right to terminate a contract for their convenience. This right essentially allows such an organization to walk away from its contract if it believes it to be in its best interest to do so. Some common reasons cited for government agencies terminating contracts for convenience include: 

  • A breakdown in a working relationship
  • Gaining the ability to provide contracted goods and services in-house
  • An inability to restructure the terms of a contract

In cases where a partner breaks a contract without cause, you can typically go after it for breach of contract. That is not the case if a contract is terminated for convenience. Per the Congressional Research Service, you would only be entitled to compensation for the work you have already done, plus that of any expenses associated with ending your service. To seek damages for breach of contract, you would have to show that the agency had been operating in bad faith in its initial dealings with you. 

More information on contractual freedoms and restrictions can be found here on our site. 

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