The primary aim of many a prudent business will be to escape a bad bargain, especially given the uncertainty over economic growth, plunging revenue streams and a palpable lack of credit in the markets. Against this background and in the context of the building industry, where such adverse factors may be even more pronounced, exiting a contract may actually be an extremely attractive proposition to some, if not many.

Whilst this may be the case, most building and engineering contracts can, as a matter of course, only be terminated in limited circumstances, such as for material or persistent default, insolvency, force majeure or where they do not contain an express termination provision at all. Clause 44 of the Second Edition of GC/Works/1 Contract was an example of an early provision in the UK that allowed an employer to terminate for any reason whatsoever, other forms of contract subsequently adopted this provision. In the USA, similar provisions were also incorporated into the American Institute of Architects A–201 General Conditions and in the aerospace industry, such terms can be seen in, for example, Lockheed Martin’s standard terms and conditions for the Space Shuttle Project.

These types of contractual provisions are commonly known as termination for convenience clauses and their prevalence and incidence of use is clearly in the ascendancy. They are, in fact, now fairly common.1

Convenience clauses provide flexibility in uncertain times and it is this feature that makes them such an attractive proposition. At their simplest, they allow a party to unilaterally terminate a contract (at any time) without recourse to any determination provisions for default and without there being a breach of contract. Such clauses are clearly open to abuse and indicative of this is the fact that many clients and contractors have been known to invoke such clauses so as to substitute a contract with a cheaper alternative, which raises the issue of whether this is legally permissible.

---

420