Cadden & Fuller LLP Cadden & Fuller LLP

A Client-Focused Approach to Business and Real Estate Law

Can your business partner end your contract at its convenience?

On Behalf of | Jan 28, 2021 | Business Litigation |

Past posts on this blog touched upon scenarios where a business partner may be in breach of contract. Like many business owners and executives in California, you may believe these situations only include cases where a partner prematurely ends an agreement without you giving them cause to do. This comes from the assumption that only a failure on you and your company’s part to fulfill the terms of an agreement provides justification to end it.

Yet is that truly the case? It may come as a surprise to you to learn that companies can indeed end a contract even without cause. Understanding which companies and entities can do this is vital to you knowing how to best handle such a scenario should you ever face it.

“Termination for convenience”

Along with “termination for cause,” contract law also allows for “termination for convenience.” Basically, this permits a contracted entity to end its agreement whenever it believes it to be in its best interest to do so. Some of the common reasons a business partner might cite termination for convenience when trying to end your contract may include:

  • You refusing to renegotiate a contract’s terms
  • Your partner securing the capacity to provide the service you offer in-house
  • A general breakdown in your business relationship

According to the Congressional Research Service, government agencies can automatically cite termination for convenience in any situation. Private companies, however, can only end a contract with you in this way if you initially afforded them the right to do so during contract negotiations.

Can you still pursue a breach of contract claim?

Typically in such a scenario you can only collect for services already rendered. Damages for breach of contract, however, may be an option if you can show that your former partner never intended to complete the terms of your agreement (thus demonstrating bad faith).