The Commission concluded that the termination of the contract prior to the purchase of the guaranteed minimum did not constitute a breach of contract. The termination clause offers compensation to the contractor so that the contract does not become illusory. On appeal, the contractor argued, among other things, that: (1) the termination was in bad faith because NPS terminated the contract to obtain a better price for the work; (2) The cancellation of the invitation by the NPS constitutes a misuse of powers, since the protest against the offer was unfounded and the NPS had alternatives that it had not considered; (3) The termination of NPS for reasons of expediency constituted a breach of contract because NPS had not acquired the guaranteed minimum set out in the IDIQ Agreement. and (4) NPS` cancellation of the application was inappropriate. Termination clauses for convenience are common in government contracts. If a contract does not contain a termination clause, termination for a less than valid reason should entitle the terminated contractor to its loss of profits for the project. Alternatively, the contractor should not plan an inventory that is not tied to the contract. This could constitute civil fraud 90 or criminal fraud. 91 If, for convenience, you receive a notice of partial termination, be sure to apply for a fair adjustment for the increase in the cost of performing the work of indefinite duration.

As explained below, the “termination for convenience” clause gives a contractor less time to submit a request for an appropriate adjustment of indeterminate work than to submit a proposal for a termination settlement. Nevertheless, the courts have given contractors some flexibility to claim costs, either as a request for a reasonable adjustment of the work of indefinite duration or as a cost of the terminated part of the contract in their proposed termination settlement. 97 It is apparent from Optimum Services that the burden of proof on a contractor of an unlawful dismissal for reasons of convenience by the Government is extremely high. The government prefers to conclude that its actions were not taken in bad faith and did not constitute an abuse of power. Therefore, a contractor must provide clear and convincing evidence that the government`s termination was illegal. The mere rejection of the contractor by the government`s dismissal decision is not enough. The “Termination for Convenience” clause in Part 12 of the FAR Commercial Item Contracts – paragraph (l) of FAR 52.212-4, “Conditions – Commercial Items” clause – states that the Contractor is not required to comply with the principles of contractual cost or cost accounting standards. 35 Conscientious objectors may apply the termination principles of Part 49 of the FAR as a guideline for the termination of commercial contracts if they are not inconsistent with the rules for the termination of commercial articles. 36 The abovementioned principle of `fair compensation` appears to apply, since it does not appear to be contrary to the rules on the termination of commercial articles. This language of conversion, from illegal to practical, protects the terminating party in the event that the termination is found to be unlawful, allowing the terminating party to avoid potential costs such as anticipated profits and consequential damages that an angry contractor could claim in a legal dispute. However, “illegal” can have several meanings in connection with termination.

For example, an “illegal” termination could occur due to a contractor failing to comply with the termination provisions of the contract (i.e., failure to grant a 48-hour right to remedy a material breach). In this case of “illegal” termination, the courts have applied the conversion provision of a contract, thus excluding the terminating party from the total exposure to a dispute.2 On the other hand, an “illegal” termination could be more serious, for example, if a contractor acts in “bad faith” in the performance of the termination. The government will usually implement the standard action by first issuing your company a healing notice and then a letter of justification. When you get to the cause phase of the show, remember that a standard termination action might be just around the corner. If a fixed-price contract has been performed at a loss, the contractor is not entitled to a profit and cancellation is subject to loss adjustment. In the context of a claim settlement, the Contractor`s termination fee, excluding the settlement fee, is reduced by the percentage of damage that the Contractor would have suffered at the time of entering into the Contract. 66 Contractors can often recover profits and avoid loss adjustments by asserting fair adjustment claims that increase the contract price and (b) by keeping the government in its burden of proof. The convenience clause developed in Civil War shipbuilding contracts and was refined in U.S. government munitions treaties during World War I and World War II.

The theory was that the government needed broad discretion to terminate its war treaties at the end of hostilities. The traditional prohibition of “illusory” contracts – that is, “promises” that are unenforceable because they do not really bind the promiser – have been swept away given the sovereign`s interest in not buying more than was needed to support the war effort. (See Questar Builders, Inc. v. CB Flooring, LLC, 978 A.2d 651, 663-68 (Md. App. 2009); expanded discussion on the development of the termination clause in the federal and state contract.) If you are really interested in this topic, you need to click on the link above. But here`s the little thing about it: Termination for convenience can sometimes be done partially. In other words, if permitted by the contract, a customer may cancel part of the work for convenience by termination – while their contractor or part of the remaining work is delivered. There are two different types of contract termination, “for cause” and “for convenience”.

To view the second half of this article, please see Part 2.5. Remember that a termination for convenience essentially converts a fixed-price contract into a refund contract. Claim all your costs incurred up to the total contract price, regardless of which party is responsible for the costs, including the cost of delays caused by the contractor and concomitant delays and the costs of defective or non-compliant work. As we have already mentioned in the article, the genesis of the termination clause for convenience begins with the federal government. .