Absent compelling justification, the New York State Office of the State Comptroller (OSC) will not approve a contract that provides the vendor with the unilateral right to terminate the contract for convenience.

While there is no legal prohibition against the use of such a clause, providing a vendor with the unilateral right to terminate a contract can create a situation in which all vendors are not bidding on the same basis.

Exercising such a clause allows a vendor to manipulate the bidding process by controlling the period for which the service is to be provided. In short, such a clause provides the vendor with the ability to walk away from its obligations under a contract, without consequence, at any time the vendor decides the contract is no longer beneficial. Such a clause provides the vendor with an unfair advantage over other bidders who based their bids on the full term of the agreement as set forth in the solicitation issued by the State agency.

Further, such language leaves the State agency in a position where it is unable to plan a proper allocation of resources, since at any time a contractor can choose to end its contractual relationship, leaving the agency without services. Additionally, the State agency may be forced to engage in a new solicitation and incur additional costs that it had not anticipated.

Since both parties may mutually agree to terminate the relationship at any time, the vendor should not be provided with the ability to walk away from its contractual obligations without the consent of the contracting State agency.

If a contract exists that contains a unilateral termination provision and the vendor decides to exercise the clause, the State agency will need to re-bid the procurement.

Guide to Financial Operations

REV. 12/12/2014