Lately, in view of the COVID-19 pandemic, there is a heightened concern that some construction projects will not proceed as planned. Therefore, it is important to review each party’s right to terminate a construction contract and to examine some of the resulting consequences.

While the parties to a construction contract can, as always, agree to other mutually acceptable terms and provisions, in broad terms, a typical construction contract includes four triggering events that can lead to termination.

First, an owner can terminate a construction contract if the contractor defaults and thereafter fails to cure such default, which may include, without limitation, the failure to remediate deficient work, the failure to meet the construction schedule, the failure to pay subcontractors and the failure to comply with applicable law. A contractor must be mindful of the fact that in the case of such termination by the owner for cause, the vast majority of construction contracts provide that the contractor will not be entitled to receive any further payment for work performed by the contractor until the work is finished.

Reprinted courtesy of Stuart Rosen, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.