The use and abuse of termination provisions

The use and abuse of termination provisions

What are the challenges when drafting or using termination provisions in construction contracts? Victoria Peckett, partner and head of the construction team at CMS Cameron McKenna, looks at their use and at what the future holds for termination provisions.

How has the use of termination provisions developed over the past five years?

Not much has really changed in the last five years. There has always been a well-established practice of providing for construction contracts to be terminated in a number of scenarios. Mostly these relate to default and insolvency. So there is a well-developed procedure of including these terms in contracts. However, using them can be very contentious, so quite a few disputes about termination clauses end up as reported cases.

Did the financial crises affect the use of these provisions and, if so, how?

In my view, not particularly. Termination clauses have always been used and there have always been instances of people wanting to get out of their contractual relationships. If anything, we may see an increased use of them in the coming years--certainly in the UK market. As we come out of the recession and there is more work around, people may want to get out of work that is unprofitable. This may happen not only with one-off projects but also in the case of framework contracts. People may have signed up to these when there was not much work around but then do not want to stay in them when there is better work elsewhere to be found.

Have terminations provisions been abused?

This is a good question. It depends on what you mean by abused. It is rare to see obvious cases of abuse where one pa

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