i-law

International Construction Law Review

TERMINATION FOR CONVENIENCE: RECOVERING THE EXPECTANCY

Franco Mastrandrea

LLB (Hons), MSc, PhD, FRICS, FCIArb, Barrister Senior Vice President and Head of Expert Services, International. Managing Director, Europe. Hill International
Termination for convenience” typically allows a party to a construction contract to terminate further performance under the contract without being required to show cause.
Whilst a common outcome is that the party who so terminates does not suffer the usual financial consequences of breach of contract, such as liability to compensate for the balance of the other party’s expectancy1, there are notable exceptions to this rule. Thus, in Germany, although section 649 of the Civil Code provides that the customer may terminate the contract at any time up to completion of the work, it goes on to provide2:
“If the customer terminates the contract, then the contractor is entitled to demand the agreed remuneration; however, he must allow set-off of the expenses he saves as a result of cancelling the contract or acquires or wilfully fails to acquire from other use of his labour. There is a presumption that the contractor is accordingly entitled to 5 per cent of the remuneration accounted for by the part of the work not yet provided”.

ORIGIN

The concept of termination for convenience can most clearly be traced to the Federal jurisdiction in the US.
The cornerstone authority is United States v Corliss Steam Engineering Co 3 .


Pt 3] Termination for convenience: recovering the expectancy

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