Termination for Convenience is a slippery slope in vendor management. Without it, you’re doomed to terminate only for breach. With it, you can end a dismal vendor relationship without a lawsuit. Termination for Convenience, fact or fiction?
Fact: Vendors will attempt to eliminate Termination for Convenience in your contracts every time. It’s your job to ensure that it stays in the contract. Okay, the ability to terminate the contract and any related Statements of Work within two days may be a bit harsh, but you should have a back fence position on it. I’ve gone as far as 120 days in order to ensure that Termination for Convenience stays in the contract. Remember, without termination for convenience you can only terminate for breach, which is a serious offense and is rare in most cases. Usually, Termination for Convenience is exercised when a vendor isn’t performing or holding up their end of the bargain. It is a safeguard for you and your company. Now, a vendor may come back and ask for the Termination for Convenience clause to be mutual. This is tough, and must be fully thought through. Is this a platform that would cause a major business disruption if the vendor felt like terminating one day? If so, think long and hard about allowing Termination for Convenience to be mutual.
Fiction: Vendors will tell you that Termination for Convenience affects their revenue recognition. Revenue recognition is not your responsibility, so don’t let a vendor talk you out of Termination for Convenience because they’ve laid this one on you. You’re the client, you’re paying for their services and if they don’t stand behind their product or services enough to give you some sort of Termination for Convenience clause in your contract, rethink the relationship with the potential vendor and be prepared to walk away.