Termination for convenience: the clause that lets a broker or agency end your ride contract without cause

What the clause does

A termination for convenience clause ends a contract early for any reason, with no breach by the other side. The party using it owes written notice and, where the contract says so, payment for work already done. It is a different exit from termination for cause, which needs a failure. The written warning that can come before a cause termination is a cure notice.

Ride contracts hold both kinds side by side. MTM’s standard provider agreement (the 01.01.2023 version Pennsylvania DHS posts) lets MTM end the contract at once for breach, a member safety concern, the end of its own client contract, or other good cause. In a separate sentence it lets either party leave for convenience on 30 days’ written notice. The first list needs a reason. The second does not. The leaving a broker guide covers what the exit costs and how to run it.

Who can use it, and on how much notice?

Notice runs from 30 to 90 days in these five published ride agreements, and one of the clauses belongs to the buyer alone.

A one-way clause gives the contractor no matching exit. In the Mississippi agency’s terms only the agency can use it, and the contractor is paid in proportion to the services under the contract, less payments already made.

Low volume does not shorten notice. MTM promises no minimum number of trips, and a provider that wants out because too few trips arrive gives the same 30 days.

What happens to trips already on the schedule?

Notice does not end your duties on the day you send it. Under MTM’s agreement, a provider that gives notice must run the trips already assigned within the 30 days. Trips left undone can bring liquidated damages and an offset for MTM’s cost of rebooking them with another provider. Unpaid claims at the time of notice are held until MTM has received and audited the service records. Monroe County’s agreement is plainer: the contractor stops all work on the last day of service.

What can a terminated contractor recover?

A contractor ended for convenience under the federal clauses is paid for the work it did and for the reasonable costs the termination caused, but not for profit on work it never did.

• Commercial services (FAR 52.212-4(l)). A percentage of the price that matches the work finished before the notice, plus reasonable charges you can show from your normal records. Government cost accounting rules do not apply, and nothing is paid for work or costs that could reasonably have been avoided.
• Fixed-price contracts (FAR 52.249-2). The price of accepted work not yet paid, the cost of the terminated work including start-up and preparation expense, a profit on those costs (none if the contract would have lost money), and reasonable settlement costs such as accounting and legal work. Apart from settlement costs, the total cannot pass the contract price, less payments already made and the price of any work not terminated.
• A wrongful default. If an agency ended a commercial contract for default and was wrong, FAR 52.212-4(m) treats the ending as a termination for convenience.

A settlement proposal under 52.249-2 is due within one year of the termination date unless the contracting officer extends it, and records stay available for three years after final settlement. The federal clauses apply to federal contracts. A broker, county or agency pays what its own contract says: MTM’s keeps your rights for services performed before the termination date, and the Mississippi terms pay in proportion.

Which contracts must include one?

A county, state agency or other buyer spending federal money must put the clause in every contract over $10,000. Appendix II(B) to 2 CFR part 200 requires such a contract to address termination for cause and for convenience, including how it is carried out and the basis for settlement. Appendix II(A) adds remedies and penalties for breach once a contract passes the simplified acquisition threshold. The government NEMT contracts guide lists the other clauses that come with federal funds.

Asking for terms you can live with

A convenience clause costs you little when notice and wind-down terms match on both sides. Ask for these in the draft:

• Matching notice. The same number of days for each side, long enough to place your vans elsewhere. Monroe County’s agreement uses 90 days for both sides.
• A trip handoff rule. Say whether assigned and recurring trips continue through the notice period, and what the buyer owes if it pulls them early.
• A payment date for the last invoices. MTM holds unpaid claims until its audit finishes, so ask for a date.
• Recovery terms. For work that needs vans or staff set aside, ask the buyer to cover costs it caused you to commit, in the way the federal clauses do.

The master services agreement entry lists the other clauses to read twice.

Seeing what a payer is worth

Before you weigh a notice period, check how much of your revenue one payer carries. HealthRide’s payer summary breaks out trips completed, cancellations, revenue billed and the balance still owed for each payer, for whatever dates you pick, so you also have the unpaid amount in front of you during a wind-down.