Termination for Cause

Reference

Category

Termination

Legislation/Policy

Includes reference to requirements in the Corporations Act 2001 as a result of the commencement of the Treasury Laws Amendment (2017 Enterprise Incentives No  2) Act 2017

Additional Information

Guidance

This clause should be included when the Customer wishes to include a list of events that will create a right of termination for cause under the Contract.

This provides the Parties with greater certainty regarding termination for cause.  Cause means having a reason for the termination, usually related to the Supplier’s performance, misconduct or other serious event that negatively affects the Supplier’s ability to properly perform its obligations under the Contract.

The exercise of the right to terminate for insolvency events may be affected by provisions in the Corporations Act 2001 (Cth) relating to staying of termination rights. The Customer should consider the effect of these provisions, and obtain legal advice, before seeking to exercise this right in relation to a Supplier that is covered by this legislation.

If this clause is included, it is necessary to ensure a separate clause is included that deals with the issue and receipt of Notices.  It is also usual to exclude termination for cause clauses from any dispute resolution process included in the Contact.

Clauses

Termination for Cause

The Customer may issue a Notice to immediately terminate or reduce the scope of the Contract if:

  1. the Supplier does not deliver the Goods and/or Services as specified in the Contract, or notifies the Customer that the Supplier will be unable to deliver the Goods and/or Services as specified in the Contract;
  2. the Customer rejects the Goods and/or Services in accordance with the Contract and the Goods and/or Services are not remedied as required by the Notice of rejection;
  3. the Supplier breaches a material term of the Contract and the breach is not capable of remedy;
  4. the Supplier does not remediate a material breach of the Contract which is capable of remediation within the period specified by the Customer in a Notice of default issued to the Supplier; or
  5. subject to the Customer complying with any requirements in the Corporations Act 2001 (Cth), the Supplier:
    1. is unable to pay all its debts when they become due;
    2. if incorporated – has a liquidator, receiver, administrator or other controller appointed or an equivalent appointment is made under legislation other than the Corporations Act 2001 (Cth); or
    3. if an individual – becomes bankrupt or enters into an arrangement under Part IX or Part X of the Bankruptcy Act 1966 (Cth).

Termination of the Contract under this clause does not change the Customer’s obligation to pay any Correctly Rendered Invoice.


Notes

While use of this clause is optional, it is common for contracts to include a clause of this type.

Standardisation of contractual text results in efficiencies for both Parties to a contract. Before deciding whether a particular clause is appropriate, procurement officials should carefully consider the context of their procurement. Capitalised terms (unless otherwise defined) are based on the definitions in the CCS Glossary.  Definitions of any relevant defined terms may need to be added.

Clause wording would generally need to be changed where in the context of the particular Contract there are specific obligations or other events, that if breached should result in a right to terminate.

Otherwise, where this clause is included, the clause wording should be used without change.

Terms that are capitalised may need to be changed to align with the Contract terminology.

Last updated: 31 July 2018