By AIA Contract Documents
January 30, 2023
The last thing that an owner wants to do on a project is having to terminate a contractor. Termination can lead to a delay in completion of the project along with the potential for litigation. Understanding when termination is warranted and the process is crucial to minimize the headaches that accompany termination.
Under A201- 2017, there are four circumstances in which a contractor may be terminated for cause by the owner:
It’s important to note that under the first and third circumstances, termination is only proper where the condition has occurred repeatedly. The contractor is not subject to termination for merely one violation. On the other hand, the second circumstance does not contain any similar requirement.
Once of the circumstances above are present, the owner must 1) get certification from the architect that sufficient cause exists to justify the termination. The owner must then 2) provide seven days’ notice to the contractor and the contractor’s surety prior to terminating the contractor. Following the seven-day notice period, the owner may:
Ideally, an owner won’t be faced with terminating a contractor. However, should the circumstances arise, the A201- 2017 details the process for termination while also protecting the owner’s rights and remedies under the contract.
AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.