Termination of the Contract and Exit from the Relationship. Contract termination is the last resort to be sought by Municipality when dealing with disputes and non-performance. It should be taken into consideration that solving disputes through courts usually costs a lot of time and money. Termination of a contract may be considered for a variety of reasons, such as non-compliance with contract conditions, delayed deliveries, bribery, death or sequestration/liquidation of the contractor. If termination is considered, the following factors must be addressed to the Bid Adjudication Committee: • The particular contract condition empowering the action for the purpose of resolving any dispute. • What further arrangements will be made for completing the contract. • Whether additional cost will be recovered from the contractor; and • Payment of work already executed prior to cancellation of the contract. The contract should contain detailed provisions on the mechanism to terminate all or part of the contract and exit from the relationship. Under the following conditions, the Municipality may consider their rights to terminate the contracts through delegated authority if they are appropriately drafted: • Failure to meet the service performance targets for critical services on a repeated basis. • Failure to meet a certain number of service performance targets during a specified period or supplier has engaged in corrupt and fraudulent practices during the bidding process or the execution of the contract. • Material breach of terms and conditions with the breach being either irreparable or not having been remedied within a specified period. • Major financial difficulties being encountered by the contractors (e.g. under liquidation). • Failure to meet mandatory requirements or failure to acquire certain accreditation or license or approval during the period of the contract. Exit provisions should be included in the contract to cover specific rights that will be required for termination. Contracts must include the possibility to be terminated. This will normally include the details of timing including periods of notice (exit clause) and direction on the payment upon termination. The contract or agreement will have stated the initial term with specified period after which either party may terminate or renew the agreement, provided both parties agree to the terms and conditions. Termination of a contract is usually detrimental to the municipality; therefore, serious thought must be given to the grounds for considering termination...
