Termination For Convenience
In this episode we explore a new type of contract so one-sided that it isn’t a real contract at all…
Over the past few weeks I’ve been hearing quite a bit about a new clause that’s being quietly added into increasing numbers of commercial and government contracts over here. It’s called Termination For Convenience, and looks something like this:
What the clause means is pretty much what it says: that whoever’s driving the contract - usually the client - can cancel their side of it at any time, for any reason, or even no reason at all. And in most cases, without any penalty either - leaving the supplier to carry all of the costs of sorting out the resultant mess.
For a relatively recent real-world example, the Australian government used a Termination For Convenience clause on the French contractors for Australia’s nuclear submarines to causally kick them out mid-project and switch to the US/UK AUKUS proposal instead. They then left the French government to deal with all of the costs and chaos - and the diplomatic fallout (no pun intended) from that betrayal will probable reverberate for decades to come.
Not A Good Idea…
In essence, a Termination For Convenience means that the so-called ‘contract’ becomes binding only on the supplier: the client is supposedly free to walk away on a whim. This is basically the same as how Trump (in)famously made his fortune in New York, reportedly stiffing just about every supplier or contractor who ever made the mistake of working for him there. It’s also the same with Putin’s Russia, which, as a co-signatory of the 1994 Budapest Memorandum, is supposed to be a guarantor of Ukraine’s borders - yet has long since betrayed that commitment. Those two examples were flagrantly illegal - for Trump, in US law, and for Putin’s Russia, in international law. But nowadays, with a Termination For Convenience clause tucked somewhere within the respective contract or treaty, behaviours that unethical (to put it mildly!) could easily purport and pretend to be fully legal. That’s what’s so obscene about this type of clause.
To bring it down to everyday experience, here’s how that type of clause would affect someone like me. As it happens, I’ve never been a ‘permanent employee’: I’ve always been either an independent, or a consultant or contractor working with others. For the latter, a typical role would actually be as a subcontractor, maybe a couple of layers below the primary contractor. My own contract probably wouldn’t include ‘Termination For Convenience’ clause, but it often would include one that says that I’ll only get paid if the contractor above me gets paid. Which sounds fair enough, sort-of: but I bill monthly, and that bill doesn’t get paid for another month after that. So if the overall client springs a ‘Termination For Convenience’ trap, then suddenly I and my colleagues are not only immediately out of work, but down at least two months’ pay, with no way to get any of it back. And I’d have no idea that I’m facing that kind of risk when I signed my contract, because the clause that springs that trap isn’t in my contract at all.
As in the AUKUS case, a whole section of an entire industry can be crippled without warning in this way, with devastating consequences for everyone involved - other than the end-client, of course - and all of it for no real reason other than someone’s random whim. A Termination For Convenience clause might look convenient and ‘clever’ to the wrong kind of lawyer misadvising the wrong kind of client; but it will definitely come back to bite them when no-one can risk working in that industry any more. Again, definitely Not A Good Idea…
There’s also a much broader-scale and perhaps bleaker way to interpret this. There’s a useful metaphor in which we could say that we’ve signed a contract with nature: that it will support us and keep us alive, if we in turn care for the natural-world in which we live. In the past few centuries, though, we’ve increasingly acted as if that contract didn’t exist any more: that there’s somehow a nice convenient-for-us Termination For Convenience clause in that contract where nature has responsibility to us but we don’t have any reciprocal responsibilities other than at our convenience - where we can pretend that we can still demand all of those support-services from nature, but we don’t have to uphold our side of the contract at all.
But there’s that old apocryphal warning, that “Only when the last tree is cut down, the last fish is eaten, the last stream poisoned, only then will you realise that you can’t eat money”. The reality is that there is no Termination For Convenience in our contract with nature; and right now that contract is in real danger of falling apart. We need to rebuild our relationship with nature to a more mutual and respectful one while we still have the chance to do so.