Like many business owners or executives in Tennessee, you likely gauge your company’s health on the number of business contracts you have in place (as such agreements indicate both guaranteed work in the short-term and a continued demand for the products and/or services you offer).

Yet as many of our past clients here at The Hurley Law Firm, P.C. can attest, a business contract may not offer the complete security that you expect. Your belief may be that as long as your company fulfills its contractual terms, your partner cannot prematurely end your agreement (since you have not given it any cause to do so). Yet that may not always be the case.

“Termination for convenience”

On top of the right to terminate contracts for cause, select businesses may also enjoy the benefit of a legal principle known as “termination for convenience.” This allows them to simply end a contract when they believe it to be in their best interest. Common reasons to cite termination for convenience in order to cancel a contract may include:

  • Your unwillingness to renegotiate the terms of your contract
  • Your partner securing the ability to provide the products and/or services you off “in house”
  • A general breakdown in your business relationship

Per the Congressional Research Service, government agencies automatically have the right to terminate contracts for convenience. Private companies, on the other hand, can only exercise this right if you afforded it to them when negotiating your contract.

Collecting what is to you

If you do have a due contract terminated at your partner’s convenience, you typically can only collect payment for services rendered up to that point. Damages for breach of contract are only available if you can prove your partner initially negotiated your agreement in bad faith.

You can find more information on your business’ contractual rights throughout our site.