By K&L Gates partner Jason L. Richey
Imagine a contractor who has done an outstanding job of building a magnificent skyscraper in the heart of one of the world’s largest cities. The skyscraper is 65% complete, expected to be finished on time and within budget. The contractor has not defaulted, and proudly touts that this construction project will be the centerpiece of the company’s accomplishments. Suddenly, the owner of the project notifies the contractor that it has been terminated from the job for the owner’s convenience. To complete the skyscraper, the owner replaces the contractor with one of its competitors. Can the owner unilaterally terminate the contractor even though the contractor was not in default? If so, what compensation is the contractor entitled to recover? The answer to these questions lies within the termination for convenience provision which has become increasingly common in private construction contracts.