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Can a company terminate a contract for convenience?

As a small business owner in Troy, you rely heavily on the security that comes from having service contracts with your clients. A contract signifies stability in that as long as your business is able to meet its terms, you will have work to do. Thus, having a partner try to terminate a contract can be potentially devastating. If you are like most, then you hold the assumption that a party to a contract can only end it prematurely if it has a valid cause to do so. Unfortunately, that may not always be the case. 

There may circumstances where a contractual partner attempts to an agreement for its convenience. For private companies, this option is only available to them if it has been stipulated in the contract itself. However, per the Congressional Research Service, government agencies are automatically afforded the right to do this. 

What are some reasons why your partner might want to terminate its contract with you early? Some of the more common include: 

  • It no longer needing the products or services addressed in the contract
  • It procuring the resources to supply said products or services in-house
  • You being unwilling to renegotiate the terms of your agreement
  • Your business relationship otherwise deteriorating 
  • A question arising as to the propriety of awarding the contract
  • The services addressed in the contract proving impossible or too costly to provide

In the event that a contractual partner (who is legally permitted to) ends your contact for its convenience, you are entitled to collect any fees related to whatever services you have already provided (as well as compensation to cover the costs of ending your service). You typically can only sue for breach of contract if you have evidence that your partner initially negotiated your agreement in bad faith. 

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