Termination for Convenience Risk Checker in New York Construction Contracts
'Termination for convenience' lets the GC or Owner cancel the contract without cause and pay only work-in-place plus limited close-out costs — no lost profit on unbuilt work. Combined with a broad definition of 'costs,' this can leave you with millions in unrecovered mobilization or lost-margin.
Enforceable; good-faith limitation permits recovery for pretextual termination.
New York: A.J. Temple Marble & Tile v. Union Carbide Marble Care, 87 N.Y.2d 574 (1996)
Typical exposure per project when a T-for-C clause slips into a signed contract.
NY's A.J. Temple decision permits an override where T-for-C is pretextual. Draft carefully.
In NY, a pretextual T-for-C can be recharacterized as a T-for-Default with full damages — cite A.J. Temple.
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“Contractor may terminate this Subcontract for its convenience at any time, and in such event Subcontractor shall be entitled only to payment for Work satisfactorily performed through the effective date of termination.”
“Upon a termination for convenience, Subcontractor shall be entitled to (i) payment for all Work satisfactorily performed through the effective date of termination, (ii) demobilization, subcontractor cancellation, and restocking costs, (iii) reasonable overhead and profit on Work actually performed, and (iv) a termination settlement fee equal to five percent (5%) of the unperformed portion of the Contract Sum.”
- 1Always negotiate demobilization and cancellation costs into the T-for-C recovery formula.
- 2Push for a fixed termination settlement fee (typically 3–8% of unperformed value).
- 3Distinguish T-for-C from T-for-Default — the latter should require notice and a cure period.
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