October 23, 2015 Practice Points

Washington Court Rules a Termination for Convenience Provision Is Not Illusory

The decision in SAK & Associates, Inc. v. Ferguson Construction, Inc. distinguishes Washington law from some jurisdictions that interpret the implied covenant of good faith and fair dealing to impose a limitation on termination for convenience provisions

by Paul R. Cressman Jr.

The decision in SAK & Associates, Inc. v. Ferguson Construction, Inc., No. 72258-1-I, 2015 WL 4726912 (Div. 1, August 10, 2015) distinguishes Washington law from some jurisdictions that interpret the implied covenant of good faith and fair dealing to impose a limitation on termination for convenience provisions. The court ruled that a termination for convenience provision is not illusory, and the covenant of good faith and fair dealing will not trump express and unambiguous terms, as there cannot be a breach of good faith when a party simply stands on its rights according to a contract’s terms.

SAK entered into a subcontract agreement with Ferguson for the furnishing of concrete materials and paving services for the construction of hangars at an airport. SAK partially performed the contract between April 18, 2012 and July 27, 2012, and Ferguson terminated SAK from the project on July 27, 2012. The notice of termination referred to “phasing restrictions, site logistics, and basic convenience,” citing to the termination for convenience provision in the subcontract. Upon termination, Ferguson paid SAK its proportionate share of the contract for actual work performed.

Premium Content For:
  • Litigation Section
Join - Now