Last year I discussed the enforceability of termination for convenience provisions in the case of Vila & Son Landscaping Corp. v. Posen Construction, Inc., 99 So.3d 563 (Fla. 2d DCA 2012). In that case, the contactor terminated its subcontractor for convenience because it found another subcontractor at better pricing. The Second District Court of Appeals found that there was no wrongful termination and the termination for convenience provision in the subcontract was enforceable.
Recently, in a non-construction contract setting, the Fourth District Court of Appeals in Handi-Van, Inc. v. Broward County, Florida, 38 Fla. L. Weekly D1350b (4th DCA 2013), discussed the enforceability of termination for convenience provisions which are “contractual provisions which ‘permit one party to terminate a contract, even in the absence of fault or breach by the other party, without suffering the usual financial consequences of breach of contract.’” Id. quoting Harris Corp. v. Giesting & Assocs, Inc., 297 F.3d 1270, 1270 (11th Cir. 2002). The Fourth District maintained in a lengthy discussion that termination for convenience provisions are enforceable under Florida contract law. In that case, the party challenging the termination tried to argue that there was not sufficient consideration for the termination for convenience provision (and, thus, it was not enforceable); however, the court seemed to quickly dismiss this argument by finding that because the provision required 90 days written notice prior to the termination for convenience, this notice constituted sufficient consideration to uphold the enforceability of the provision.
Parties that challenge termination for convenience provisions in Florida often rely on federal procurement / government contracting cases because there is a “bad faith” exception, i.e., a federal agency cannot terminate a contract for convenience in bad faith. See TigerSwan, Inc. v. U.S., 110 Fed.Cl. 336, 345 (2013). This is no different than the parties in Hani-Van or Vila & Son Landscaping that tried to challenge the termination for convenience provisions in their respective agreements. However, this bad faith exception has really been pushed to the bottom of the barrel in Florida contract law because courts are not in the business of rewriting contractual provisions in order to relieve a party from a provision contraced for and agreed to.
Termination for convenience provisions are important provisions for owners, contractors, and even subcontractors that utilize sub-subcontractors. The key is for the provision to be clear and it is good practice to include that the party can exercise the termination for convenience provision by giving the other side notice (whether it is 7 days, 10 days, etc.) to remove any argument whatsoever that there was not sufficient consideration for the provision.
For more information on termination for convenience provisions, please see: https://floridaconstru.wpengine.com/the-enforceability-of-termination-for-convenience-provisions/
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.