Terminating a construction contract has major financial and legal consequences for both owner and contractor. A procedural mistake can turn the party in the right into the party liable for damages.
Common grounds for termination
- Material breach, such as significant delay or suspension of the works.
- Termination for convenience, where the contract gives the owner that right.
- Failure to pay amounts due on time.
- Circumstances that make performance impossible.
Steps before terminating
Most construction contracts, including those based on FIDIC forms, require specific notices and a period to remedy the breach before termination. Strict compliance with those procedures and deadlines is essential for a valid termination.
Consequences of termination
- Valuation of work done up to the termination date.
- The fate of bonds and guarantees.
- Damages due to the injured party.
- Handover of the site, documents and equipment.
Practical tips
Keep records of all project correspondence and meeting minutes, review the termination and dispute resolution clauses before acting, and take legal advice before — not after — sending a termination notice.
Content on this website is for general information only and does not constitute legal advice.