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Topics: Communications Management, Construction, Risk Management
Termination of Contract
What should be the provision under this clause ? Generally it is found to be biased in favour of the client.Please share your views/experience.
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This can be very varied and depends on the conditions at which the contract was brokered and the company/lawyers who created the conditions of termination. If you're looking to create brand new conditions, as you work with a new company, I recommend consulting with a good contract lawyer who can give you some standard boilerplate language to start with and you can modify from there. In general here are some great examples of typical conditions
It would depend on multiple parameters - if the contract has been officiated legally, if the buyer is from a manufacturing or the service industry, and whether there is a penalty clause.
For the buyer from manufacturing domain - its going to be pretty much straightforward : deliver the product and take your money.
But the gaps and loop holes are very high in the service industry - if and only if the critical factors have been met, are the KPI's in place, what kind of metrics been used to conclude service realisation, how much variations observed ... the list goes on.
In my opinion it would have to be based on Supplier's allowable expenditure limits. Supplier may want to benchmark as to what extent are they okay to spend and by when they would expect the buyer to pay. If the two benchmarks not met - then the supplier may want to politely excuse from the contract citing "Funding Limit Reconciliation".
There are multiple reasons to terminate a contract. Two important pieces of advice:
1) talk to a lawyer that specializes in contract law
2) be explicit in whatever terms you include - ambiguity is difficult to enforce and can be used against you.

That being said, I've seen contracts that outlined the process for how to deal with failure to perform and escape clauses. One contract had a provision for at-will termination, where either party could terminate the contract with 30 days notice. Whatever you do, I can't overemphasize avoiding ambiguity. I worked at a company that was bleeding a million dollars a year due to a poorly worded contract.
In the contracts I've been working with, there is always a clause in the General Conditions Section called: Contract Termination and it is divided into two parts:

1- Owner’s Right to Perform the Work or Terminate the Contract.
2- Construction Manager's Right to Suspend the Work or Terminate the Contract.

Under each part, there are certain condition mentioned for both parties so my experience is that the contracts that I've been dealing with protects both parties equally. An example of on one of the standard contracts we use in Canada is the CCDC 5B.
Agree, Liana and Aaron; consider your situation and consult with the expertise to provide amicable outcomes.
Agree with Liana, Aaron and Naomi, first you need to consult an expert in contract familiar with local laws, each country will be deferent.

Rami comment on two set of clauses on for each parti to the contract is what I have often see also. and look in your country you might have something like the CCDC we have in Canada.

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