Construction contracts often contain a clause allowing the owner to terminate “for convenience”, meaning without citing a particular reason.  Contractors challenge “Termination for convenience” clauses and commentators and analysts cast doubt on validity and enforceability.  Last year the Washington Court of Appeals upheld such a clause (SAK & Associates, Inc. v. Ferguson Construction, Inc., No. 72258-1-1, 2015 WL 4726912 (Wash. Ct. App. Aug. 10, 2015)).  The contractor challenged the termination as lacking consideration; and as violating an implied covenant of fair dealing.  The Court of Appeals rejected both arguments.

Owners are glad to have this precedent, even though the question is one of state law.  Contract drafters must take great care in drafting these clauses nonetheless, especially in stipulating the settle-up consideration to be paid to the contractor.