Why You Should Avoid Mutual Termination for Convenience

Ever ask a supplier for the right to terminate for convenience, only for them to ask for the same in return? Tit for tat might make sense in most negotiation situations, but when it comes to termination, you could be exposing yourself to unnecessary risk.

I’ve been in procurement for over 20 years. And I have yet to hear a valid reason for agreeing to mutual termination for convenience.

Why? Watch today’s video to find out:

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Video Transcript

How many times have you found yourself arm wrestling with a supplier for termination for convenience?

As the name implies, the clause allows one party to notify the other party that they no longer wish to do business with them and the contract is terminated.

Now here’s the nuance that a lot of negotiators miss: as a customer, there is no reason for you to agree that this be a mutual clause. In fact, it’s probably to your detriment.

And yet that’s what I see written into a lot of negotiated supplier agreements. And a negotiation on this point usually goes something like this:

Customer: Hey, I only see termination for cause - we need termination for convenience.

Supplier: Well, ok, but if we’re going to put it in there, we should make it mutual, like indemnities and liabilities.

Customer: Well, alright. I guess that makes sense.

But it doesn’t make sense. You’re the customer. You’re paying for the supplier to provide you with goods and services. And as long as you’re paying, they shouldn’t have the right to decide suddenly that they no longer want to provide it - or worse, threaten to terminate some critical product or service just to renegotiate their agreement.

However, as a customer, you should absolutely have the right to decide who you want to buy from and when to terminate an agreement for something you no longer need or are satisfied with.

So the next time a supplier asks you for mutual termination for convenience, ask them why they need it. And it should be a valid business reason, not some lame excuse like “Well if you have it, then we should have it”.

In 20 years, I have yet to hear a supplier provide a valid reason for having termination for convenience in a contract, which is why I never agree to it - and neither should you.

Thanks for watching. Next week, we’ll talk about the ever-elusive cap on annual increases.

And remember, if you really want to take your negotiating game to the next level, check out our free video course on the “7 Skills of an Elite Negotiator” at oneviewnow.com/negotiator.