I missed your earlier comment to the same effect. I have to agree with you. There’s always a reason, even if that reason is unreasonable.

I’ll try “for any reason” in a deal, and let you know what happens.

Unfortunately, most clients buying services will expect to see ‘termination for convenience’ in a term sheet or draft contract. Vendors certainly use the term, esp. in the context of the fees they are owed upon its exercise.

Personally, I prefer “termination at will”.

Hey, hold on—I’ve already written that post! It’s the one about at its discretion.

Inspired by my rereading that post, I offer the following summary: If you’re using termination for convenience in an attempt to get around the implied obligation of good faith, I suggest that (1) your semantics need recalibrating and (2) you’re doomed to fail. If your objection is that the term is so entrenched it’s not worth changing, I have more sympathy, but not much: termination for any reason is more broadly used and ultimately expresses more clearly the intended meaning. I’m more open-minded regarding the wording to use for the section heading. Regarding and for no reason, there’s no point my repeating myself. (Of course, none of this applies to termination for convenience in the context of government contracts!)

Ken

This is all radically different from the commercial contracts context, where you are discussing a simple walk-away. I would have thought that it is possible to draft a walk-away – aircraft leases, at times, contain lessee walk-away rights by which the lessee, notwithstanding the agreement on a fixed term of years of use (and payment of rent), may simply elect to terminate early and incur no liability, and I have never thought that a lessee in such a case would have any responsibility to act in good faith in deciding to exercise a valuable right it obtained during negotiation.

That’s why I tried the “remedies” approach – the government must pay to exercise the right, but it must always have the right. In the commercial world, if you agree that your counterparty can have a walk-away right for any reason anbd with no recourse to break payments, what difference does it make if he later exercises it because he’s mad at me (i.e., that he acted in bad faith)?

By contrast, no one terminates a contract for no reason. There’s always a reason. Maybe it’s not a good one, but that’s a separate issue. I’ll be researching the implied obligation of good faith, but I expect that I’ll just confirm my current impression, which is that you can’t draft around it.

Ken

Ken

But I think it’s important to keep the implied obligation of good faith out of the discussion. Your comment suggests that I object to termination for convenience because it’s perhaps overbroad. That’s not in fact my point.

From my perspective, the broader, the better. Termination for any reason is as broad as you can get, whereas termination for convenience could conceivably be construed more narrowly. A party’s ability to rely on one or other provision might be constrained by the implied obligation of good faith, but that’s something that’s external to the contract. In particular, I see no basis for thinking that using termination for convenience would somehow allow you to sidestep the implied obligation of good faith.

Ken

Wow, this is quite a conversation. Let’s try this: in a government contract, there are two termination rights: for default, and for convenience. One major difference between the two is in the rights of the terminated party: a T4C generates a right to a collection from the government that is different from the collection rights (if any) that a T4D generates. And a contract that is wrongly terminated for default by the government is treated as a T4C, thereby entitling or enhancing the collection by the party that was wrongfully terminated.

Your point is a good one: “convenience” doesn’t mean that the government has a whimsical right to walk away, it means that termination is now in the best interest of the government, and it has a price. But this is all government contracts parlance (which does flow down to subcontracts between two commercial parties where the government is not a party). I live in the world of commercial aviation finance, where I don’t think I have ever seen a termination for convenience clause. To those who include such in commercial contracts: does a purely commercial T4C bring a right to collection (wind-up costs, etc.) or does it merely give one party the right to end a contract and simply walk away? If the latter, I think Ken has a point – that’s real convenience, and perhaps too convenient to be enforceable?

10803: As I mention in my post, the for convenience language sometimes occurs only in the section heading. But often enough it’s used in the body of the provision too.

Your suggestion for how to sidestep the issue in section headings is an interesting one. If Acme is the only party permitted to terminate for any reason and both Acme and Widgetco can terminate for breach, you could apply either of two approaches. Under your approach, you’d use “Termination by Acme” and “Termination by Either Party.” The alternative approach would be “Unrestricted Termination/Termination for Convenience/Termination for Any Reason” and “Termination for Breach.”

Neither approach is completely informative. To achieve that, you’d need to combine both approaches—an unlikely notion. You could mix-and-match, but I’m not crazy about that idea either.

So again we’re looking for the lesser of various evils. I’d normally vote for approach number two, but if it allows me to avoid a debate over section headings, I might go for number one. Let me mull this over.

And I’ll ponder the merits of how you structure your termination provision.

Regarding the merger clause, I agree. The alternatives—”integration clause” and “zipper clause”—aren’t much better.

By the way, 10803, someday you’ll have to unmask yourself!

Mel: Another reader pointed out that in FAR the “for convenience” language isn’t actually “for convenience” in the conventional sense. Instead, “for convenience” as stated in FAR clause means when it’s in the Government’s interest. (I haven’t checked this out myself.) But that shouldn’t make any practical difference: if you want to do something, generally it’s because it’s in your interest.

J and Scott (different from the Scott Wilson who commented earlier): Longtime readers of this blog will be aware that I’ve previously fessed up to being a relative newcomer to commercial agreements. But I’m sticking to my guns.

The fact that a usage is widely embraced isn’t enough, in my mind, to legitimize it, particularly when (1) the usage in question is used to convey a meaning that’s at odds with the meaning in regular usage and (2) a clearer alternative is available.

Regarding or any reason, having a reason to terminate has nothing to do with the other side’s having been a bad actor. Instead, it just means that for whatever reason, termination would serve the interests of the terminating party.

And I don’t think that fear of being called on to state in a termination notice the reason for terminating, even though the contract doesn’t require it, is reason enough to insert in the contract an element that is otherwise illogical.

And by the way, in addition to termination for any reason, another alternative to termination for convenience is termination at will, which is used in employment agreements. This reinforces that terminology is often less a matter of meaning than of habit—often bad habit!

Ken