Those companies in Michigan that work contractually likely derive a great deal of security from those agreements. After all, a contract signifies stability through the implication that as long as a contracted party fulfills its obligations, its business relationship with its partner remains guaranteed.
Yet is that true? The common school of thought is that a contracted party needs to have cause in order to prematurely end an agreement. A legal principle exists, however, that allows companies to walk away from contracts if they believes it to be in their best interest to do so. Legal experts call this “termination for convenience.”
When might a company terminate a contract for convenience?
There may be a number of different reasons why a contracted party would cite termination for convenience. According to information shared by the Congressional Research Service, common reasons include:
- One party no longer needing the goods/services the other offers
- One party refusing the modify the terms of the agreement
- Questions arising as to the propriety of one party’s participation in the contract
- One party losing eligibility to qualify for the contract
- One party gaining the ability to provide the contracted goods/services “in-house”
- A general breakdown in the business relationship between the contracted parties
Who can end contracts for their convenience?
Government agencies automatically have the right to end contracts for their convenience (the general stability they offer often counterbalances the potential risk of such entities ending a contract early). Private companies, however, can only cite termination for convenience if their partners afforded them that benefit during contract negotiations. If they do not have it, those damaged by such companies ending agreements early may seek damages for breach of contract.
