Securing a contract with a government partner is a big get for any company. Such organizations tend to be reliable, and your company's association with them will no doubt boost its reputation. Yet as many of the clients that we here at the Triangle Law Group have worked with in the past can attest to, there are certain risks that come with working with government agencies. One of these is the potential that they could walk away from your agreement for almost any reason (including those that you may feel are not justified).
The concept of "termination for convenience" has been detailed on this blog before, but only by saying that it is an option when such a right is granted by a contract. However, this only applies to private organizations. Per the Congressional Research Service, government entities are afforded the right to terminate a contract for convenience automatically. This means that any such entity can walk away from your partnership for reasons like those detailed below:
- It no longer needs the goods or services you offer (or it can now provide them itself)
- It now believes the cost for your goods or services to be too high
- It has asked you to renegotiate the terms of your contract, yet you have refused
Even something as simple as a deterioration in the relationship between you and your government partner may allow it to end your contract.
What does this mean to you your company? If a government partner ends your contract for convenience, it must pay you a termination settlement to cover what you have done so far. You can only be compensated for breach of contract, however, if you can show your agreement was negotiated in bad faith. More information on contractual disputes can be found throughout our site.