A termination for convenience clause gives a project owner flexibility to pull the plug on all or a portion of the project without breaching the contact. The contractor is paid for work performed prior to termination, as well as costs such as subcontractor settlements and demobilization incurred in closing out the project. But, the contractor cannot recover breach of contract damages such as anticipated profit on the unperformed, deleted work.

There are limits, however, to an owner’s discretion in terminating for convenience. In a recent case, a federal agency constructively terminated work in order to get a better price from another source. This was an abuse of discretion and a breach of contract. The contractor could recover proven lost profit on the unperformed work.

Other cases this week addressed the distinction between a materialman and a contractor, as well as the waiver effect of bilateral contract modifications. The Wyoming Supreme Court said a lumber supplier could not qualify as a contractor and was therefore subject to a shorter lien filing period. And, the Armed Services Board ruled that waiver and release language had been modified by the contractor’s reservation of rights.