Termination for convenience: does it mean what it says?

By Henry Sherman

Until recently, clauses permitting termination for convenience were a rarity in standard form construction and engineering contracts. It remains the case that the Hong Kong forms contain no such provisions. Increasingly, however, other standard forms now enable the employer — and less often the contractor — to bring the contract to an end without default, breach or even a specified reason.

This is, for example, the case with the FIDIC Red Book and other FIDIC forms. Of more direct relevance to Hong Kong, the NEC3 family of forms, including the engineering and construction contract (ECC) and the professional services contract (PSC), also allows termination for convenience. The wording of clause 90.2 of the ECC is characteristically brief: ‘The employer may terminate for any reason.’

The practical advantages of such a clause to the employer are clear. It provides him with an escape route if funds dry up or for some other reason the project is no longer feasible. In some instances, it could enable him to replace a contractor with whose performance he is unhappy for reasons that might not amount to breach. He might also be confident that by terminating and retendering he will get a better price…

Click on the link below to read the rest of the Minter Ellison briefing.

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