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What is a termination proposal?

On Behalf of | Jan 27, 2021 | Business Law |

Past posts on this blog detailed the legal principle known as “termination for convenience” (which basically allows companies to lawfully end business contracts when they believe it to be in their best interest to do so). Should you have a partner that chooses to lawfully invoke this privilege, what should you then do?

Your first consideration may naturally be to question whether your now-former partner indeed acted lawfully. Yet minus clear evidence that they never intended to let your agreement go to term, you cannot press for damages for breach of contract. Your next step should then be to prepare a termination proposal.

Covering costs already incurred

A termination proposal is a written statement detailing your recoverable costs. Per the American Bar Association, you must submit such a proposal within one year of your former partner ending your contract. The most obvious expenses owed to you would be payment for work already done (or services already rendered). Even in cases where you have already received some money, if that doe not fully cover everything provided, you can seek the remaining amount.

Calculating future costs

Even though your business agreement is no longer in place, your termination proposal can also state an expectation of future costs. This may include the expenses associated with ending your work (including payment to subcontractors needed to assist in the termination. If your work required leasing equipment, your former partner must also cover any fees due from having to prematurely end your lease. You may also be able to collect for any expenses required to prepare an inventory of services rendered, as well as any legal costs you may incur in preparing your termination proposal.