TERMINATION OF CONSTRUCTION CONTRACTS AND SUBCONTRACTS

Abstract

Disputes arise between the owner and general contractor, as well as between the general contractor and subcontractors, which may result in contract termination. Regardless of whether the dispute concerns payment, performance or other matters, parties often threaten to terminate the contract. Termination of a contract is a very serious and harsh action and should only be utilized after a complete review of the contract and facts surrounding each situation. The decision to terminate is almost certain to result in litigation, increased costs, and delays.

There are times when termination of the contractor may be the only feasible course of action, but it is a course of action that should be undertaken very carefully and only after exhausting all other reasonable alternatives. In addition, because of the high risk nature of the termination remedy, great care should be taken at the contracting stage to allow maximum flexibility for initiating such action and with a protective fall back limiting damages in the event that the owner should not prevail in the almost inevitable litigation. Hopefully, this paper has provoked sufficient thought and concern that you may even be able to develop your own protective strategies and provide even more protection to the owner should that unfortunate eventuality occur.

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