Should Your Contract Cancellation Clause Be Based On Hours?

Nov 11, 2014 12:00:00 AM · by David Kushan

Unfortunately, some of the lessons you learn in the contracting business are learned the hard way. The hard way generally means that you were dealing with someone who took advantage of a situation that caused you some major inconvenience. Once these situations occur, of course, you do what you can to prevent them from happening again.

Most contracts include a clause that allows them to be terminated early. So, even though your contract may be written to end on a certain date, every contract I’ve ever seen gives the client the ability to end it early. Typically, there’s a paragraph that states something to the effect that the client can end the contract early by providing XX number of days’ notice. 

On one occasion with a contractor whom we had working primarily from home, the client notified us that they were going to be ending the contract early and that they were giving us the required notice. Since this contract was not very long to begin with, they were required to give us only two weeks’ notice. So, if we were given notice on Monday, February 10, the contractor’s last day would be Friday, February 21. The client gave the notice because they had just hired someone and decided to pass off the future work to this person. But although they gave a two-week notice, they were no longer sending the contractor work to perform. 

However, the contractor understood a two-week notice to mean two more weeks of paid hours, so the following week he submitted a timesheet for 40 hours. Unfortunately, the client said they would not approve the timesheet because the contractor did not actually do any work. I hope you see the technicality here. I believe you will not run into this type of client very often. But the point is that if you change the cancellation clause from providing two weeks’ notice to providing-80-hours-of-billable-work notice, you have a much lower likelihood of this ever happening to you.

You may also like: The Demise of Non-Solicitation Agreements

Consulting, David Kushan


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