{"id":898164,"date":"2020-11-03T12:30:03","date_gmt":"2020-11-03T19:30:03","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=898164"},"modified":"2020-11-03T12:30:07","modified_gmt":"2020-11-03T19:30:07","slug":"bad-faith-termination-for-convenience","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/bad-faith-termination-for-convenience\/","title":{"rendered":"Bad Faith Termination for Convenience"},"content":{"rendered":"\n<p>Patrick Tighe | <a href=\"https:\/\/information.swlaw.com\/REACTION\/2020\/Newsletters\/UnderConstruction\/1023_UC_WEB.html#article3\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Snell &amp; Wilmer<\/a><\/p>\n\n\n\n<p>Many construction contracts include a clause that allows an owner to terminate a contractor\u2019s remaining work on a project at the <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/termination-for-convenience-clauses-in-the-private-arena-traps-every-construction-practitioner-should-know\/\" target=\"_blank\" rel=\"noreferrer noopener\">owner\u2019s convenience<\/a>. And during a global pandemic and these turbulent economic times, termination for convenience clauses are receiving renewed attention, including under what circumstances an owner may not terminate for convenience.<\/p>\n\n\n\n<p>At the outset, some courts have at times viewed termination for convenience clauses suspiciously because such clauses typically confer an unfettered right to terminate only upon the owner. To some courts, this lack of mutuality appears to constitute an \u201cillusory promise\u201d lacking consideration, and thus, a provision some courts may not enforce. To remedy this issue, some courts have required an owner to have good faith reasons when exercising the termination for convenience clause. If an owner acts in bad faith when terminating for convenience, the owner will have violated the implied duty of good faith and fair dealing. See generally 5 Bruner &amp; O\u2019Connor Construction Law \u00a7 18:47.<\/p>\n\n\n\n<p>But when does an owner act in bad faith when terminating for convenience? Few Arizona courts have analyzed termination for convenience clauses, let alone explained the limitations on exercising such provisions. However, in&nbsp;<em>Arizona\u2019s Towing Professionals, Inc. v. State<\/em>, the Arizona Court of Appeals held that the owner of the contract acted in bad faith when it invoked its \u201ccancellation for convenience\u201d provision to thwart administrative or judicial review of a state\u2019s decision in awarding contracts after the bidding process. More recently, the Arizona Court of Appeals held that the City of Avondale did not act in bad faith or abuse its discretion in terminating for convenience its contract with a towing company when the owner of the towing company was arrested for two felony counts stemming from his involvement with a prior town business for which he had been general manager.&nbsp;<em>Go Services, LLC v. City of Avondale<\/em>, 1 CA-CV 16-0482, 2017 WL 6328004 (App. Dec. 12, 2017).<\/p>\n\n\n\n<p>Beyond Arizona, other courts have held that a party acts in bad faith when it terminates a contract for convenience simply to acquire a better bargain from another source. See, e.g.,&nbsp;<em>Krygoski Constr. Co. v. United States<\/em>, 94 F.3d 1537, 1541 (Fed. Cl. 1996). For instance, in&nbsp;<em>Greer Properties, Inc. v. LaSalle National Bank<\/em>, the Seventh Circuit held that a party could not terminate a contract for convenience \u201cto shop around for a better price.\u201d The Seventh Circuit explained: \u201cWhen the [defendant] entered a contract with [the plaintiff and] agreed to pay them a specific price for the property, [the defendant] gave up their opportunity to shop around for a better price. By using the termination clause to recapture that opportunity, [the defendant] would have acted in bad faith.\u201d<\/p>\n\n\n\n<p>Although few Arizona courts have explored the limitations on termination for convenience clauses, precedent from federal appellate courts indicate that an owner acts in bad faith when it terminates for convenience simply because the owner got a better deal. To avoid potential allegations of bad faith, an owner may want to confer with counsel before deciding to exercise its termination for convenience rights simply because the owner found a better bargain elsewhere.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Patrick Tighe | Snell &amp; Wilmer Many construction contracts include a clause that allows an owner to terminate a contractor\u2019s remaining work on a project at the owner\u2019s convenience. And during a global pandemic and these turbulent economic times, termination for convenience clauses are receiving renewed attention, including under what circumstances an owner may not&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/bad-faith-termination-for-convenience\/\">Continue reading <span class=\"screen-reader-text\">Bad Faith Termination for Convenience<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[10720,9],"tags":[9895,224,324],"class_list":["post-898164","post","type-post","status-publish","format-standard","hentry","category-bad-faith-insurance-coverage","category-construction-contracts","tag-advise-consult","tag-construction-contract","tag-termination-for-convenience-clause","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Bad Faith Termination for Convenience - Advise &amp; 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