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Articles Posted in Commercial Litigation

It is a general proposition of New York law (and elsewhere) that contracts should be enforced as they are written. That basic proposition served as the deciding factor in a recent decision which filled in some gaps in case law regarding contractual termination conversion clauses.

In Minelli Construction Corp. v. WDF Inc., et al., N.Y. Co. Index No. 105989/2011, a trial court recently upheld the commonly found clause in construction contracts which allows a party who terminates a contractor or sub-contractor for cause to automatically convert the termination into one for convenience if proper cause for the termination is not later found by a Court. The difference in the nature of the termination is significant. New York law provides that a wrongfully terminated party may pursue a large range of damages, including lost profits for unperformed work, while a party terminated for convenience is typically limited to being paid for work already performed. Thus, if a conversion clause is held not to apply, a finding of a wrongful termination will open the door to damage claims which the owner or general contractor may not have anticipated.

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