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Understanding construction contract termination

On Behalf of | Aug 9, 2022 | Construction Law

New construction means a lot is at stake for the community and its people. The Austin downtown area has 19 million square feet of planned space and 9.2 million square feet in the midst of construction, according to the Downtown Austin Alliance’s annual report. That makes it imperative to complete projects on time and the right way.

While owners hope each construction project unfolds as it should, the need to terminate a contractor may arise.

Avoid wrongful termination

Before and during a project, issues arise. While negotiation works for many, some issues become detrimental to the project. From faulty work to missed deadlines, a contractor not delivering is hard to miss. The ideal solution allows contractors to correct issues and resolve construction disputes.

Unfortunately, some cases make that impossible. If it becomes the last resort, follow the contract to avoid a wrongful termination. Along with added liability, such as paying for lost profit and unused materials, the owner may face a lawsuit from the contractor.

Ensure contracts include termination for convenience

A termination for convenience clause in the contract helps owners avoid a wrongful termination situation by allowing owners to use any reason in their best interest to end a contract. Typically, this clause includes a payment to contractors for finished work and earned profits, but owners hold no liability for unearned profit or associated damages. Owners should still terminate based on fair dealings and good faith.

The construction world comes with many challenges for everyone involved. A proper contract offers protection for unplanned situations.