Termination for convenience clause: what it means, a typical example, and what to ask for
A termination for convenience clause lets the builder end your subcontract at any time, for any reason, without you being at fault. The right itself is common and rarely removed. What you can negotiate is what you are paid when it is used.
A typical builder version
The Contractor may at any time and for any reason terminate this Subcontract by giving written notice to the Subcontractor. Upon such termination the Subcontractor is entitled to payment for work properly carried out up to the date of termination, and to no other amount, including for loss of profit.
Illustrative wording of the kind found in builder-authored subcontracts, not taken from any one contract.
What it means for you
The builder can end the job whenever it likes. You are paid for work done, nothing for materials ordered or fabricated, nothing for demobilisation, and nothing for the profit you priced.
- Payment limited to work done at the termination date.
- No payment for materials ordered, fabricated or delivered for the job.
- No payment for demobilisation or cancellation costs from your suppliers.
What market looks like
A termination for convenience payment covering work done, demobilisation, materials ordered or fabricated to your specification, supplier cancellation costs, and sometimes a percentage of the unearned margin.
What to ask for
"On termination for convenience, the Contractor must pay the value of work carried out, the cost of materials ordered or fabricated for the Works (which become the Contractor's property on payment), the Subcontractor's reasonable demobilisation and cancellation costs, and [x]% of the value of the unperformed work."
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Common questions
Can a builder terminate a subcontract for no reason?
If the subcontract includes a termination for convenience clause, yes. Without one, the builder generally needs a contractual or legal ground to terminate.
What should I be paid if my subcontract is terminated for convenience?
Whatever the clause says, which is why to negotiate it before signing: work done, committed materials, demobilisation and cancellation costs at a minimum.
One clause rarely tells the whole story
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General information, not legal advice. Example wording is illustrative. Check any clause you rely on against your full contract and your state's Security of Payment Act. Written by Mat Kennedy, The Construction Contracts Co.