If you're wondering how to break a contract with a contractor, you should review the contract before making any moves. Most independent contractors bring specialized expertise to a job and remove a significant need for oversight. They are able to lower time and cost involved in training new employees. Independent contractors are often hired to complete a variety of tasks and can be a valuable resource in helping you successfully reach your business goals.

Drawbacks of Hiring Independent Contractors

While there are many advantages to hiring independent contractors, there are drawbacks to be aware of too. Independent contractors take pleasure in certain autonomy to make their own decisions on the work employers hire them to complete. With no performance evaluations and relatively short-term projects, this means independent contractors could overextend their commitment to multiple clients or lack the skills they need to meet your business's standards.

How to Protect Yourself When Hiring Independent Contractors?

You can protect yourself when making a contract with an independent contractor. There are also actions you can take when you find yourself needing to terminate an independent contractor's contract.

Each independent contractor should agree to and sign a written contract. This should not be a one-size-fits-all type of agreement. The contract should specifically list the contractor's individual/company name along with the specific job and expectations they are being hired to perform, along with the rate of pay agreed upon. In addition, a termination clause should denote the circumstances under which the contract can be terminated.

If an independent contractor's work is not quality work and requires updates or edits, do not continue to offer job opportunities to the contractor.

How to Break a Contract With a Contractor?

Communication is key to doing good business. If you are not satisfied with a contractor's job performance and are ready to terminate the agreement, contact the contractor and explain why you are going to end the business relationship. They should be paid for the portion of the job that was completed.

Why Should You Break a Contract?

There are many reasons a business agreement can go sour. This makes it very critical that detailed provisions be provided in a written contract to ensure a clear understanding between the parties in the event that a termination is requested.

For Cause and For Convenience Termination

In the construction industry, contract terminations are often executed under the two terms:

  • For cause
  • For convenience

If termination is being executed under the condition “for cause,” there would need to be proof that one party failed to perform the duties set forth in the contract.

One example would be if the contract clearly states a timeline and the independent contractor is repeatedly not meeting timeline dates due to not showing up to work and/or not arranging materials to be delivered in a timely matter. This could be a circumstance that termination may be executed “for cause”.

Generally, if the contract is terminated under “for cause,” the party that has been found to be at fault will be held liable and penalized for the breach in contract.

On the other hand, if termination is being executed under the condition “for convenience,” there does not have to be proof of a contract breach by one party. When defined explicitly in a contract, “for convenience” can be executed lawfully.

Many times, this is included in a contract as an escape for both parties, to prevent significant harm in the event of a disagreement. For example, friends or family entering contracts often worry about a business deal coming between them. Best-case scenario, the contractor receives payment for the portion of work completed and the owner avoids paying damages or penalties for ending the contract.

If a party claims “for cause” as a means to breach a contract, but fails to provide proof of cause, then the breach will likely be considered as “for convenience”. If criteria are not met under “for convenience,” then the party initiating the contract termination will be held liable.

There are many situations that can arise and bring cause for terminating a contract, such as poor job performance, personality conflicts, and nonpayment. However, good communication and clear expectations can ward off such instances. Clearly defined contracts are a must for employers when hiring independent contractors.

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