The clause permits termination without breach, typically requiring payment for work performed plus defined costs. It originated in government contracting and appears in commercial and construction agreements.
Bad faith exercise may be challenged.
Alternative Names:
Convenience Termination|T for C
Why it Matters?
The clause eliminates the risk of wrongful termination but is not unlimited, since courts have found bad faith where a party terminated to obtain the same work at a lower price from another provider. That constraint operates through the implied covenant rather than the clause's text. Compensation provisions define the actual cost, and clauses limiting recovery to work performed without overhead or profit make the option substantially cheaper.
Frequently Confused with
Related terms
Frequently asked questions
Is the right unlimited?
What determines the cost?
