Termination for cause applies only to commercial contracts. The Government may terminate all or portion of a commercial item contract for cause if the contractor fails to: Comply with contract terms and conditions; or. Provide the Government, upon request, with adequate assurances of future performance.

A Termination for Default is the complete or partial termination of a contract because of a contractor’s actual or anticipated failure to meet its contractual obligations. A Termination for Cause is the term used for a Termination for Default in a FAR PT 12 contract for the acquisition of commercial items.

This occurs when one party cannot totally complete its contractual obligations. The contractor may terminate the contract due to the owner’s failure to pay. If it appears termination is imminent, the contractor should attempt, as much as possible, to come to a compatible resolution with the owner. …

Typically, a termination for convenience clause states: “Owner may at any time and for any reason terminate Contractor’s services and work at Owner’s convenience. Simply stated, if the contract is terminated for convenience, the contractor will not earn the profit that was anticipated when the contract was executed.

52.249-1: Termination for Convenience of the Government (Fixed-Price) (Short Form) 52.249-2: Termination for Convenience of the Government (Fixed-Price) 52.249-3: Termination for Convenience of the Government (Dismantling, Demolition, or Removal of Improvements)

A termination for cause can create negative impacts on the contractor’s future work and can also hurt them regarding bonding capacity and credit rating. Termination for convenience, however, allows both parties to walk away satisfied.

A termination for cause can only take place if one party cannot completely fulfill their contractual duties. An example of this would be a contractor terminating their contract for cause because the owner failed to pay them in the time that was determined in the contract.

Acceptable Reasons for Termination

• Incompetence, including lack of productivity or poor quality of work.
• Insubordination and related issues such as dishonesty or breaking company rules.
• Attendance issues, such as frequent absences or chronic tardiness.
• Theft or other criminal behavior including revealing trade secrets.

Top Reasons to Terminate a Contract

• Lack of Consideration.
• Lack of Capacity.
• Statute of Frauds.
• Mutual Mistake.
• Misrepresentation.
• Breach.
• Discharge by Frustration.
• Impossibility of Performance.

Sometimes also called a ‘termination for convenience clause’, a termination at will clause provides a right to terminate the contract without any cause or reason, (usually) at the sole discretion of the contractor. The sub-contractor will only be entitled to be paid for its work done up to the date of termination.

Termination for convenience clauses are important as they allow a party to put an end to a contract without having to invoke breach of contract or a cause.

The government can terminate a contract for their convenience, or in the case of most contracts in excess of $25,000, for default when the government believes that a contractor failed to perform in accordance with the provisions of the contract.

48 CFR § 8.406-4 – Termination for cause. 8.406-4 Termination for cause. (1) An ordering activity contracting officer may terminate individual orders for cause. Termination for cause shall comply with FAR 12.403, and may include charging the contractor with excess costs resulting from repurchase.

§ 200.340 Termination. (a) The Federal award may be terminated in whole or in part as follows: (1) By the Federal awarding agency or pass-through entity, if a non-Federal entity fails to comply with the terms and conditions of a Federal award ;

(a) Grounds. During the term of the lease, the owner may not terminate the tenancy except on the following grounds: (1) Serious violation (including but not limited to failure to pay rent or other amounts due under the lease) or repeated violation of the terms and conditions of the lease ;

If the schedule contracting officer has terminated any supplies or services covered by the schedule contract, no further orders may be placed for those items. Orders placed prior to termination for cause shall be fulfilled by the contractor, unless terminated for the convenience of the Government by the ordering activity contracting officer.