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Litigation Blog.
The seasoned lawyers and litigators at The Rubinstein Law Firm are here to share their insights with you.

Can companies terminate contracts for their convenience?

You may have difficulty containing your excitement every time your company in Michigan secures a new contract. Such an agreement essentially ensures a degree of stability and security for your business. These feelings come from the presumption that your partner cannot end your agreement unless your company gives them a reason to do so.

Yet is that really the case? There is a legal principle known as “termination for convenience” which essentially allows companies to end a business contract simply when they believe it to be in their best interest to do so. Should you have a business partner attempt to cite this privilege, you need to know under what circumstances the law allows this.

Reasons for terminating a contract for convenience

Federal, state and local governments automatically have the right to end contracts for their convenience. A private business can only cite the privilege, however, if it is a benefit you conceded to it during contract negotiations.

What are some common reasons why a company might termination a contract for convenience? According to the Congressional Research Service, these may include:

  • Your company refusing to negotiate the terms of your contract
  • Your partner gaining the ability to provide the goods/services you offer itself
  • Your company becoming ineligible to fulfill the terms of the contract
  • A breakdown in your overall business relationship

Monetary compensation for ending a contract early

If and when your partner terminates your contract for convenience, your first question is likely what compensation you can collect. In most cases, you can only collect for goods/services already rendered (as well as expenses associated with ending your service). You can only press for damages for breach of contract if you can show your partner never intended to fulfill the contract (thus proving bad faith).