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979 (N.M. Ct. App. 2016) (quoting Kalvar, 543 F.2d at 130102). In
order to set aside a termination for convenience, a terminated
party would need to show that the uphill party:
1. Was motivated by malice.
2. Was involved in a conspiracy or improper plan to get rid of
the terminated party.
3. Sought only to secure a better price from competitors of
the terminated party.
4. Never intended to honor the contract or subcontract when
made.
Devil in the Details
As T4C clauses will almost always be enforced, it is vital to
understand the rights and obligations of the terminated
party. While T4C clauses vary, many will expressly require
that the terminated party do some or all of the following:
* Stop work (as of the date indicated in the notice)
* Terminate all subcontracts and place no further subcontracts
or orders for materials, equipment, or services
* Assign to the terminating party all right, title and interest
the terminated party has under the subcontracts and
purchase orders terminated
* Transfer title and deliver to the terminating party all
materials acquired or produced for the project
* Complete performance of any work not terminated
* Protect and preserve any property in the possession of the
terminated party in which the terminating party has an
interest
Universally, T4C clauses will call for the payment for the
work performed by the terminated party. The key differences
among T4C clauses, however, are the basis upon which the
terminated party will be paid for the work performed; and
whether the terminated party is entitled to payment for costs
incurred, other than for the work performed, including cost
incurred solely as a result of the termination.
T4C clauses commonly call for payment for the work
performed on the basis of the existing contractual schedule of
values or unit prices. Some call for the payment of costs, plus
a markup for overhead and profit. Others may require the
terminated party to submit a price proposal for the
reconciliation of work performed and pending changes.
Unfortunately, many T4C clauses do not address costs
beyond those attributable strictly to the work completed.
Upon an early termination, a contractor or subcontractor may
be bound to equipment rental agreements, agreements for
site facilities and corresponding costs that extend beyond the
date of termination. The termination of subcontracts and
purchase orders may trigger the payment of cancellation fees,
restocking charges, penalties or other costs. Contractors may
face premiums and other additional costs resulting from
unscheduled early demobilization. Then there are the
additional accounting and other administrative costs for
effectuating these unplanned actions. If the T4C clause only
calls for payment of the work performed to the date of
termination, a contractor may suffer significant losses as a
result of the termination.
While a termination is not generally envisioned at time of
contract, a contractor or subcontractor should carefully
review the T4C clause to ensure that it provides full
compensation in the event of termination. The federal T4C
clause referenced above serves as a guide for those
contractors or subcontractors who may not be able to readily
identify the additional costs associated with termination. FAR
52.249-2, subsection (g), identifies many, if not most, of the
unplanned costs which may not be addressed in a private T4C
clause, including:
" (ii) The cost of settling and paying termination settlement
proposals under terminated subcontracts that are
properly chargeable to the terminated portion of the
contract if not included in subdivision (g)(2)(i) of this
clause; and...
(3) The reasonable costs of settlement of the work
terminated, including(i)
Accounting, legal, clerical, and other expenses
reasonably necessary for the preparation of
termination settlement proposals and supporting data;
(ii) The termination and settlement of subcontracts
(excluding the amounts of such settlements); and
(iii) Storage, transportation, and other costs incurred,
reasonably necessary for the preservation, protection,
or disposition of the termination inventory. "
The takeaway: do not overlook termination for convenience
when reviewing and evaluating a contract for risks.
110 * DEEP FOUNDATIONS * MAY/JUNE 2023
May/June 2023

Table of Contents for the Digital Edition of May/June 2023
