Termination for Convenience: Was it Done in Good Faith?


Recently, the Court of Appeals of Maryland issued an opinion, which impacts

the use of "termination for convenience" clauses in construction contracts

between private parties. In Questar Builders, Inc. v. CB Flooring, LLC,

Maryland's highest court determined that termination for convenience clauses

may be enforceable between private parties but that such clauses are subject

to the "implied limitation that they be exercised in good faith and in

accordance with fair dealing." The upshot of the Questar Builders decision is

that termination for convenience clauses do not provide a right to terminate for

any reason whatsoever. Maryland courts will review whether the justification

for termination comports with the obligation of good faith and fair dealing,

which "requires a party exercising discretion to do so in accordance with the

'reasonable expectations' of the other party." Matthew Voccie of Ober|Kaler discusses the case.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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