Understanding Termination for Cause

Construction companies are often under a lot of pressure to perform quickly. There are strict deadlines to keep in mind as well as budgetary restrictions. Getting a project done on time and under budget is a rarity in the construction industry.

When a contractor commits serious issues such as lengthy delays and overspending, it can lead to what is called termination for cause. A termination for cause is when a construction company is terminated for failing to execute a contract. When this happens, the issue in question is very serious.

A termination for cause can happen for various reasons. These reasons depend on the terms of the contract but typically include the following:

• Poor workmanship
• Understaffing the project
• Failure to communicate
• Consistent failure to perform according to schedule
• Failure to pay subcontractors, suppliers, or laborers
• Use of materials or equipment inferior to contract specifications

What Does the Contract Say?

Terminating a construction contract is serious business. It’s important to do things by the book when terminating for cause to avoid a costly lawsuit.

Many construction contracts will set out specific circumstances that justify terminating the agreement. It’s important to determine what is and what is not set out as a valid reason to terminate the contract.

Sometimes things may be vague. The contract may broadly reserve the right to terminate for breach of contract. In other cases, the contract may be silent as to when termination is justified. That doesn’t mean any little grievance is grounds for termination. Regardless, before going through with terminating a contract for cause, it’s imperative to proceed with caution.

It’s also common for a construction agreement to require a notice of default before termination can occur. This means the party who will be terminated must first be given notice that they’re in default of their contract. This allows the contractor an opportunity to cure the problem under a specific timeframe.

Other Options

Termination can be the most costly. In some cases, the party who terminated the agreement can be held liable for serious damages, including lost profits. If possible, use an alternative. Deciding not to terminate the agreement might be the best course of action. For example, you could:

Communicate. Talking it out could be the best way to keep a project on track and to avoid bigger issues. Taking the time to communicate can help to sort things out. Sometimes, it could be a simple misunderstanding or miscommunication that causes the issue.

Reduce the scope of work. If the contract allows it, reducing a construction company’s scope of work could be a good alternative. This can be done through change orders or via partial termination. Direct payments of subcontractors, suppliers, and materials could help to mitigate the potential fallout.

Contact Us Today

Sometimes contractors and construction companies don’t get the job done as planned. They default on the contract, causing them to be fired.

Termination for cause is a serious issue. A Florida default & convenience terminations lawyer from Linkhorst Law Firm can provide you with the representation you need. Make sure this is handled properly, as it could result in an ineffectual termination or a lawsuit. Fill out the online form or call 561-626-8880 to schedule a consultation.

Source:

levelset.com/blog/termination-for-cause/