Most commercial construction subcontracts have a termination for convenience clause.
This clause means that the general contractor can terminate the subcontractor at any time for no reason, just because it is convenient to the general contractor. But what happens after a termination for convenience?
A termination for convenience clause exists to allow the general contractor to terminate the subcontractor and not be liable for breach of contract. The liability the general contractor would be responsible for breach of contract is the Profit the subcontractor would have made on the job. The termination for convenience clause lets the general contractor terminate the subcontractor without having to pay them the profit they would have made.
What Happens If Haven’t Done Any Work Before The Termination?
When a termination for convenience happens before you have done any work generally you are not entitled to be paid anything. This means you are not entitled to receive payment for any mobilization cost, any time you have spent on the project or any materials you may have ordered. Normally, when a termination for convenience happens before the subcontractor has started any work it is because the general contractor has found a different subcontractor to do the same work at a cheaper price and it does not cost the general contractor anything to terminate a subcontract for convenience.
When a termination for convenience happens when the subcontractor has started the work the subcontractor is entitled to be paid for the work, they have done but nothing else. The subcontractor is not entitled to be paid for the profit they would have made on the project or the now open spot on their calendar.
Termination Without a Cause
Let me make one thing very clear, the subcontractor does not have the right to terminate the subcontract for convenience. Meaning if the subcontractor does not do the work promised in the subcontract they will owe damages to the general contractor. The subcontractor will owe the general contractor the difference between their subcontract amount and the amount the general contractor must pay to get the subcontractor’s scope of work done.
If you have been terminated without cause, meaning for no reason, and the subcontract did not have a termination for convenience clause you are entitled to recover the profit you would have made on the project. This is why it is best to have your subcontract reviewed by an attorney if you have been terminated.
Need Legal Help?
If you have been terminated for convenience, contact us at 713-715-7334 and schedule a time to talk to an attorney, and we can review all your options.
