Mr Hockey noted in his budget speech that the government would
be abolishing over 230 bureaucratic programs in the coming year.
One side effect of a reduction in the size of government, including
the abolition or merger of more than 70 government agencies, will
be the need to review all contracts between
industry program and service providers and the Commonwealth.
Norton Rose Fulbright partner
Ben Allen said the federal government may need to rely on
termination for convenience clauses in funding and procurement
contracts to enable it to scrap some of its programs. These may be
a cause for concern for many businesses engaged with the
government, which would benefit from an urgent review of their
contracts. The government must also take care not to give rise to
contractual disputes for wrongful termination if it does not act in
good faith or provide reasonable notice periods, among other
obligations under the law.
"By their very nature, termination for convenience clauses
sit uneasily with the way in which commercial parties do
business," Mr Allen said. "The contractual right of the
Commonwealth to terminate a contract where other parties are
otherwise performing their obligations gives rise to wider policy
issues that affect the way in which government and business
"Where a Commonwealth agency gives notice of its intention
to rely on a termination for convenience clause, legal advice
should be sought in relation to the reasonableness of notice and
the legal grounds on which the agency is relying," he said.
"Wrongful termination constitutes repudiation of a contract
which may give rise to considerable damages for an affected
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