Our company is working on a project requiring numerous suppliers of goods and services. We had a standard contract drafted which we ask our suppliers to sign. Last week a key supplier gave us notice that he was terminating his contract. We read through the contract and realised our suppliers are entitled to terminate by giving thirty days notice in writing. We have since heard that the supplier was unhappy with how an employee treated him but he is refusing to provide any details. This will become a huge problem for us if our other suppliers also terminate. There aren't many similar suppliers and we would have to start the entire process again significantly delaying our completion date. Is there alternative wording we should be putting in our termination clauses that will not allow our suppliers to terminate their contracts this way?
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Answer by Dilani Mudalige, Yokine 6060 WA
- Instead of a clause that allows either party to terminate for any reason by giving notice to the other party you could have a clause that allows a party to terminate only in certain situations and specifically state what those situations are in the contract.
- You could also include a clause stating that in the event a party wants to terminate they must first make a good faith attempt to resolve the dispute through a meeting between key people from each party.
- If your existing contracts allow amendments you could change the termination provisions by the method set out in the variation clauses. Depending on the wording of the variation clause this could be either by you providing notice of the change to the other parties or by both parties to the contract agreeing to the change.
- If you are worried about this clause becoming a large and costly issue for you throughout the life of the project it is advisable to engage a lawyer.