Linan-Faye Construction was terminated for convenience on a public housing project and sued for unpaid work. The district court applied federal law to interpret the termination clause, but the appeals court said New Jersey state law should apply instead. However, the court noted that New Jersey courts would look to federal common law for guidance anyway. The case was sent back to the lower court to determine what work qualifies for payment and whether the contractor can recover pre-termination expenses and damages from a withheld performance bond.
When a public agency terminates your contract for convenience, the state law of the contract location controls the interpretation—not federal law, even on federally-funded projects.
Document all pre-termination expenses carefully. Courts will examine what counts as 'work performed' to determine your compensation after termination.