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One potential drawback with working with government agencies

On Behalf of | Jan 4, 2021 | Business Law |

For many businesses in Florida, working with a government partner offers a number of advantages. Chief among these is the relative stability that such agencies offer (given the support they receive from their supporting governmental bodies). Yet there are also certain challenges that come with working with such a partner.

One of these is the potential of a government agency terminating a business contract for its convenience. Most assume that a contracted partner must have cause in order to prematurely end a contract. Yet a legal principle exists known as “termination for convenience,” and it often benefits government agencies in particular.

Understanding “termination for convenience”

The definition of this principle is just as its title infers: a contracted partner lawfully terminates an agreement when it deems it in its best interest to do so. According to the Cornell Law School, government agencies automatically have this right; it is not a benefit that a company must relinquish during contract negotiations). Some common reasons for ending an agreement at an agency’s convenience can include:

  • A general breakdown in the relationship with a contracted partner
  • The agency gaining the ability to provide the products/services its partner offers “in house”
  • Questions arising about the propriety of a business agreement
  • A contracted partner refusing to renegotiate the terms of an agreement

Securing compensation following an early contract termination

Those companies impacted by a government agency invoking its right to terminate a contract for convenience will certainly want to know what financial compensation they may receive following such an action. Per the Congressional Research Service, they can only collect for services already rendered (along with the expenses associated with ending their work). Damages for breach of contact are only available if they can show that the agency originally negotiated their contract in bad faith.

 

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