Construction Law
The Factors Involved in Termination for Cause
If you’re a contractor that owns a construction business, it’s important to be aware of the fact that there may come a time when you need to terminate your contract and relationship with the other party. While whether or not the termination is warranted or not will ultimately come down to the terms of your contract, it’s crucial to remember small or minor mishaps don’t result in termination. Typically, a construction business terminates their contract as a result of an unsuccessful relationship with the other party, poor workmanship, failure to pay subcontractors, or consistent failure to perform according to schedule and specifications. That being said, no matter the reason for terminating a construction contract, it’s absolutely critical that you contact one of the Naples construction attorneys from Cotney Attorneys & Consultants to help you successfully navigate this very serious matter.
Generally speaking, we recommend contract termination as a last resort. However, should contractor termination become necessary for whatever reason, we will assist you in adhering to the termination provisions laid out in your contract. These provisions are critical to all parties involved as they establish the conditions of the party terminating the contract prior to ending the contractual rights and obligations of the parties involved.
Related: Termination for Cause
What is the Difference Between Termination For Cause vs. Termination For Convenience?
Prior to going further into detail regarding termination for cause, we’d like to outline the differences between termination for cause and termination for convenience. Termination for cause only occurs in which one party cannot completely fulfill its contractual obligations. An example of this type of termination is a contractor terminating their contract for cause because the owner failed to pay them within the period of time determined by the contract. An owner may also terminate a contract for cause, on the other hand, if the contractor was unable to perform their work in accordance with the timeline established by the contract.
Termination for convenience is different because it occurs when neither party actually breaches the contract, but the relationship is still terminated. Essentially, it allows both parties to end their relationship amicably or at least in a manner that does not lead to harm of either party or litigation. Additionally, the contractor is permitted to receive payment for their completed work, and the owner is allowed to avoid paying damages for the termination of the project. If you’re preparing to terminate your construction contract, either via termination for cause or termination for convenience, we cannot recommend strongly enough that you seek out the counsel of our Naples construction lawyers who are well-versed in contract law and terminations.
Related: “For Cause” Versus “For Convenience” Contract Termination
What Are the Grounds for Exercising Termination for Cause?
As previously stated, termination for cause is reserved for substantial issues in which one of the parties is rendered unable to complete its contractual obligations. Some common reasons for exercising your right of termination for cause include the following:
- Consistent failure to provide proper materials or labor
- Failure to provide payment to subcontractors, laborers, or suppliers
- Repeatedly disregarding applicable regulations, laws, or standards
- Use of materials or equipment inferior to the specifications laid out in the contract
- Failure to communicate
- Work stoppage exceeding 30 days
What to Consider Prior to Termination for Cause
Termination for cause is a very serious matter, given that a poorly executed termination often leads to unnecessary delays and expenses and irreparable repetitional harm. Poorly executed terminations frequently occur as a result of contractors not fully understanding legal doctrines such as substantial completion, making hasty decisions, and not looking into alternative approaches. To avoid being caught up in a poorly executed termination for cause, there are a few key factors to take into consideration.
First, it’s worth looking into your warranty obligations. When a contractor’s work is terminated halfway through a project, it leads to confusion over the general warranty obligation that contractor parties must repair or replace defective work for one year following project competition. Additionally, you have to consider the impact this termination will have on the course of the project. Replacing a subcontractor who has already begun work, having to assess the work he or she performed, and negotiate the terms of a new relationship can take up much more time than you’re willing to spend. Finally, even if termination is the correct approach, you still have to make sure that all parties execute an agreement that addresses the provisions and that there’s proper legal basis for termination. If you’re contemplating the termination of your contract, it’s never too early to seek the legal counsel of our Naples contractor lawyers.
If you would like to speak with one of our Naples contractor attorneys, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.