A termination for convenience clause is an important provision in construction contracts, particularly for the owner. An owner needs the contractual right to terminate a contractor for convenience. This means the owner does NOT need a reason to exercise a termination. This is night-and-day different from a termination for cause (or default) wherein an owner must have a material basis to exercise that right. Sometimes, the relationship is not where it should be, or not what was expected, or performance does not rise up to the level you require but does not rise up to a material breach. The termination for convenience clause gives the owner the discretion to just end the relationship.

As a contractor, you need to understand the types of damages (costs) you are entitled if an owner exercises the termination for convenience. Don’t overlook this, because if an owner exercises the termination for convenience, you want to make sure you feel like you are protected. This could include a termination for convenience fee. There are a number of ways this can be accomplished, but you need to be sure you are entitled to costs incurred through the date of termination with reasonable overhead and profit, demobilization costs, early return fees, and costs incurred due to the termination. Regardless, keep in mind that it is your burden, as the contractor, to prove these costs with a reasonable degree of certainty.