Construction Contract Termination Guide: For Cause vs For Convenience 2025
Complete guide to construction contract termination. Learn the difference between termination for cause and convenience, contractor rights, and how to handle government contract terminations.
Understanding Contract Termination
Termination Basics
Two Primary Types:
Cause/Default
Contractor failure
And:
Convenience
Owner's choice
Recovery Rights:
Different
Based on type
Government construction contracts contain termination clauses allowing the owner to end the contract before completion. Understanding the difference between termination for cause (default) and termination for convenience is critical for contractors, as each has vastly different implications for payment recovery and future contracting.
For Cause Termination
- • No profit on incomplete work
- • Potential liability for damages
- • Impacts future bidding
- • Surety may be triggered
For Convenience Termination
- • Fair compensation provided
- • No fault assigned
- • Negotiated settlement
- • No impact on reputation
Termination for Cause (Default)
Failure to Prosecute Work
Not maintaining adequate workforce, equipment, or progress to meet schedule.
Failure to Complete on Time
Missing critical milestones or contract completion date without excusable cause.
Failure to Perform Contract Requirements
Not meeting specifications, quality standards, or contract terms.
Anticipatory Breach
Clear indication contractor cannot or will not complete the work.
Excess Reprocurement Costs
Contractor may be liable for additional cost to complete the work.
No Profit Recovery
Terminated contractor receives no profit on incomplete work.
Surety Involvement
Performance bond surety may be called to complete or pay damages.
Past Performance Impact
Default recorded and affects future contract awards.
Termination for Convenience
Termination for convenience is a unilateral right of the government to end a contract when it determines that termination is in the government's best interest, regardless of contractor performance.
When Used
- • Funding cuts or budget changes
- • Project scope no longer needed
- • Program cancellation
- • Requirements change
Not Fault-Based
No implication of contractor failure. Simply a business decision by the government.
Work Performed
Payment for all work completed to date, including profit.
Preparatory Costs
Reimbursement for preparatory expenses and initial costs.
Settlement Expenses
Reasonable costs to prepare termination settlement proposal.
Subcontractor Settlements
Costs to settle with affected subcontractors.
Key Differences
| Factor | For Cause (Default) | For Convenience |
|---|---|---|
| Reason | Contractor failure | Government decision |
| Fault | Contractor at fault | No fault implied |
| Payment | Cost only, no profit | Fair compensation + profit |
| Damages | May owe excess costs | No damages owed |
| Surety | May be triggered | Not triggered |
| Future Impact | Negative record | No negative impact |
Contractor Rights
Cure Notice Response
Before default termination, contractor typically receives cure notice with opportunity to correct deficiencies.
Show Cause Response
Opportunity to demonstrate why default termination should not be issued.
Conversion Request
Right to request that wrongful default termination be converted to T4C.
Appeal Rights
Right to appeal termination decision through disputes process.
Contractor may defend against default termination by demonstrating delays were excusable:
- Acts of God (natural disasters)
- Government-caused delays
- Differing site conditions
- Unforeseen events beyond contractor control
Dispute Resolution
Contracting Officer Claim
Submit certified claim to contracting officer within 6 years.
Final Decision
CO issues final decision on claim (required within 60 days for claims under $100K).
Appeal
Appeal to Board of Contract Appeals or Court of Federal Claims.
Best Practices
Document Everything
Maintain detailed records of all delays, issues, and government-caused problems.
Provide Written Notice
Promptly notify the government of any issues affecting performance.
Respond to Cure Notices
Take cure notices seriously and respond with concrete corrective actions.
Seek Legal Counsel
Engage construction attorney early if termination is threatened.
Ready to Find Your Next Contract?
Get instant access to thousands of government construction bids with our AI-powered platform.
Get Started