It has been my experience that a "convenience" clause is more often
becoming part of industry agreements.  In fact, we are finding that such
a clause is sometimes in our best interests; particularly when there is
some question as to how the project will proceed, how valuable the
outcomes really are, how accurate the cost projections are, etc.
Sometimes it is worth negotiating an "out" if there is a possibility that
circumstances will change to such an extent that it is no longer valuable
to be a party to the agreement. Termination for convenience is just that,
for the convenience of the terminating party (for ANY reason).  This is
as opposed to termination for "cause" (failure of the other party to
adhere to the terms of the agreement) or termination as a result of a
sponsor discontinuing the funding.

Obviously, the key is to have appropriate protections in the agreement
tied to the convenience clause.  There should be provisions for
recovering fixed costs (like equipment), non-cancelable obligations (like
service contracts, supplies already on hand, some personnel contracts,
etc.), adequate lead time (i.e. 90 or 120 days), and language dealing with
what happens to data, preliminary results, title to equipment, etc.  There
may also be  provision for a cancellation fee payable to the terminating
party to compensate for  the loss of the agreement (and to deter the
"casual" implementation of the clause).

While I am not an attorney, it seems to me that, depending on the
circumstances and structured appropriately, a "mutual" termination for
convenience clause may not necessarily be a bad thing.

Peter C. Koch
Director, Research Sponsored Programs
Children's Hospital Research Foundation
Children's Hospital Medical Center
3333 Burnet Avenue
Cincinnati, Ohio  45229-3039

Phone: (513) 636-4583
Fax:     (513) 636-8453
E-Mail: xxxxxx@chmcc.org