Termination for Convenience Clauses in Building Construction and Infrastructure Contracts

1. Infrastructure, building and construction contracts often contain so called “termination for convenience” provisions, operating independently of breach, default or frustration. Termination of a contract has been considered as the legal consequence of certain kinds of breach, repudiation or frustration. Frustration is automatic. Breach and repudiation arise where default has occurred. 2. Provisions for termination at the convenience of, or at the will of the contracting parties, or any one or more of them, have become known as “termination for convenience provisions” (referred to in this paper as “TFC”) or “termination at will” provisions. 3. TFC can be invoked in circumstances agreed by the contracting parties (for example, at the will of all or any of the parties; in the absolute discretion of all or any of the parties; or on the occurrence of a specified event or specified events at the behest of all or any of the parties and on notice), as can their contractual consequences (for example, payment or compensation, with or without formulae for its calculation, or no compensation at all). 4. TFC in a contract would, on one view, appear antipathetic to the formation of contractual relations. TFC have given rise to debate and will continue to do so in respect of their application, construction and consequence. If a contract is defined as no more than a legally binding promise or agreement, TFC arguably occupies the whole area of possible obligation, leaving no room for the existence of a contract at all. Further, if the essence of contract, regarded as a class of obligations, is a voluntary assumption of a legally enforceable duty, where there are identifiable parties, certain terms and consideration (unless by deed), TFC may be seen to attack the fundamental elements of a binding contract. Questions of validity for want of mutuality may arise at one end of the spectrum of possible consequences of TFC in contracts (but an argument that TFC means no