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Differentiating cause from convenience

Parties enter into contracts in Raleigh all the time with the expectation that both sides will fulfill their designated obligations. That does not necessarily mean, however, that all such contracts will be carried out. Disputes over services and duties or a simple change in circumstances could prompt one side of such agreements to seek to end them. Yet how does one terminate a valid, binding contract without facing any legal consequences

People may often hear the term "with cause" associated with contract disputes, yet rarely realize what it truly means. There are typically only two ways to terminate a contract: either for cause or for convenience. Terminating a contract with cause essentially means that one side believes it has just cause to end an agreement due to a failure of the other side to meet its obligations. When defining scenarios that justify cause, the North Carolina Bar Association references the American Institute of Architects rule citing the grounds for contract termination to be: 

  • Whenever a contractor repeatedly fails to provide sufficient amounts of proper materials or skilled workers
  • When a contractor fails to make payments to subcontractors for labor or materials
  • Whenever a contractor repeatedly disregards laws, ordinances, codes or orders from a public authority 
  • When a contractor is in breach of any of the provisions of contractual documents

Terminating a contract for convenience, on the other hand, is ending an agreement solely at the discretion of one side. Information shared by the American Bar Association shows that such action can only be taken if a termination for convenience clause is included in a contract. Even then, the party against whom a contract was terminated for convenience may recover damages if it is able to show that its partner acted in bad faith when creating their agreement. 

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