Linan-Faye Construction Co. v. Housing Authority
847 F. Supp. 1191 | District Court, D. New Jersey | 1994
What This Case Means for Subcontractors
A contractor on a Camden housing renovation project sued after the owner terminated the contract for convenience. The court ruled that when a contract includes a termination-for-convenience clause, the contractor cannot recover damages for problems that happened before the termination, even if the owner was at fault. The court also said delays in formally labeling the termination don't create additional damages. This means termination-for-convenience clauses are final—they cap what you can recover.
Key Takeaways
- •If your contract has a termination-for-convenience clause, you cannot sue for damages from owner breaches or delays that occurred before termination—those claims are blocked by the clause itself.
- •Do not rely on arguing the owner delayed in formally calling it a 'termination for convenience' to recover extra damages; courts will not award damages based on labeling delays.
- •Review termination clauses carefully before signing. Understand exactly what you can recover (usually only costs incurred to date plus a small profit allowance) because you cannot claim additional damages later for pre-termination disputes.
Damages arising from pre-termination breaches are subsumed within the termination for convenience clause.
Frequently Asked Question
If the owner terminates my contract for convenience, can I sue for damages from problems that happened before the termination?
No. Courts have ruled that a termination-for-convenience clause blocks all damage claims arising from pre-termination breaches or disputes. Your recovery is limited to what the termination clause itself allows—typically costs incurred plus a small profit. You cannot sue separately for owner misconduct that occurred before the termination notice.
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