Break clauses in construction contracts

A break clause is a provision in a construction contract that allows one or both parties (typically the client or the contractor) to terminate the contract before the completion of the project under certain agreed-upon conditions. The inclusion of a break clause provides a legal means for ending the contractual relationship without being considered in breach of contract.

The inclusion of a break clause provides flexibility and protection for both parties. For clients, it offers an exit strategy if the project no longer meets their needs or if they encounter financial difficulties. For contractors, it provides a means to exit the project if there are significant issues that hinder their ability to complete the work as planned.

The break clause specifies the conditions under which it can be exercised. These conditions might include a notice period, specific dates when the clause can be activated, or particular events that trigger the clause (such as failure to meet project milestones, significant changes in project scope, or unforeseen circumstances).

The party wishing to exercise the break clause must typically provide written notice to the other party within a specified period, as outlined in the contract. This notice period allows the other party to prepare for the termination and to mitigate any potential losses.

The contract may stipulate compensation or penalties that apply if the break clause is exercised. This might include payment for work completed up to the termination date, reimbursement for materials ordered but not yet used, demobilization costs, or a lump-sum payment to cover any inconvenience or financial loss caused by the early termination.

Upon activation of the break clause, both parties must adhere to the rights and obligations set out in the contract. This includes settling any outstanding payments, handing over completed work, returning any equipment or materials, and ensuring that the site is left in a safe and secure condition.

The contract may include provisions for resolving any disputes that arise from the activation of the break clause. This could involve mediation, arbitration, or litigation, depending on the terms agreed upon by the parties.

[edit] Related articles on Designing Buildings

• Break clause.
• Break clauses in leases.
• Early use.
• Handover to client.
• Migration strategy.
• Occupation.
• Phased construction works.
• Practical completion.
• Retention.
• Soft landings.
• Partial possession.
• Sectional completion.
• Termination.