Termination for convenience

Termination for convenience is Canada’s unrestricted right to end a federal contract, in whole or in part, at any time — without the supplier having done anything wrong. It is one of the most consequential clauses in any Government of Canada contract, and its payment mechanics are set out in the standard general conditions and the SACC Manual.

What it is

Per the Standard Acquisition Clauses and Conditions (SACC) Manual on CanadaBuys, Section 5-J covers termination clauses: J0001–0999 for termination for convenience, J1000–1999 for termination for default, and further ranges for mutual consent and withdrawal. The standard general conditions (for example clause 32, "Termination for convenience", in General Conditions 2030 for higher-complexity goods) provide that at any time before completion of the work, the Contracting Authority may, by written notice, terminate the contract or part of it, effective immediately or at a time the notice specifies.

What the supplier gets paid

Per the standard clause, on termination the contractor is entitled to be paid for costs reasonably and properly incurred, to the extent not already reimbursed: the contract price for any part of the work completed and accepted; the cost incurred plus a fair and reasonable profit — determined under PSPC Supply Manual section 10.65 on profit on negotiated contracts — for work commenced but not completed; and costs incidental to the termination, excluding severance payments or damages to employees except wages owed by statute. Crucially, the contractor gets no anticipated profit on the terminated portion and has no claim for damages, compensation or loss of profit beyond what the clause expressly provides. Total payments cannot exceed the contract price, and unliquidated advance payments must be repaid.

How it happens in practice

Per the Supply Manual (archived Chapter 8, section 8.135.5), on receiving instructions to cancel, the contracting officer first issues a Stop Work Order (SACC clauses J0500C/J0502C) telling the contractor to stop work immediately, place no further orders and provide status information and an estimate of its termination claim. The formal notice of termination is prepared using Section 5-J clauses, on legal advice, and a termination claims officer processes the claim. Suppliers should submit termination claims early using the prescribed departmental forms.

Common questions

How is it different from termination for default?

Default termination (SACC J1000–1999, "Default by the Contractor") requires the supplier to be in breach, and Canada can charge its losses including reprocurement costs above the contract price. Convenience termination assumes no fault: the supplier is made whole on costs incurred, but loses anticipated profit. See our page on breach vs default termination.

Does a partial termination change my other obligations?

No. On a partial termination the contractor must continue completing the unaffected part of the work per the contract.

Related definitions

SACC Manual · Supply Manual · Notice of suspension of work · Contract administration