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Terminating A Construction Contract


Agreeing to the terms of a construction contract brings with it rights as well as responsibilities. Each party has something to do, and each party must provide something to the other party as well. As is usual, when the contract is signed, there is no indication that anything negative will happen. In fact, the signing is often a somewhat joyous occasion – the contractor believes that it will provide a project to the property owner and will be reimbursed by the property owner.  Unfortunately, there are times when events occur that sour this relationship, and necessitate considering the severing of a relationship.

Types of Termination

Generally speaking, there are two types of termination of a construction contract – terminations for cause and terminations of convenience.  Ideally, procedures for terminating a construction contract are set forth in the contract themselves.  As such, it is imperative that anyone considering termination use the services of an experienced Construction Law Attorney to ensure that all procedures are followed, as there may be significant penalties for failure to do so.

Terminations for Cause

Among the reasons for termination for cause are non-payment by the property owner, non-payment by the general contractor, non-performance by the general contractor, non-performance by a subcontractor, and lack of timeliness of performance.  Regardless of whether one of these conditions exist, since termination ends the rights and obligations of one or both parties, it should be exercised only upon serious consideration of the consequences.  There is a very strong chance the party being terminated may claim the termination was wrongful and subject the terminating party to exposure for corresponding damages, which may include lost profits.  Since, often construction contract disputes can be resolved and, in light of any potential consequences, every effort should be made to exhaust all options before commencing termination.  In any case, the termination procedures set forth in the construction contract should be strictly followed.  It is important to provide all required notices, which may be to a performance bond surety and/or to a lender.

Terminations of Convenience

Terminations of convenience typically carry less risk and are often favored which the relationship between the parties has soured but not become extremely acrimonious.   Like terminations for cause, the procedure for terminations for convenience should be set forth in the construction contract.

Seek Legal Advice

If you are involved in a construction contract and are considering termination, engage the services of an experienced Construction Law Attorney as soon as possible.  The attorneys at Linkhorst Law Firm, P.A. have the experience to help ensure that all opportunities to cure are exhausted and all procedures, both contractual and legal, are addressed.  Contact our Jupiter office today for an initial consultation.

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