Certified Texas Contract Manager Practice Exam

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In a situation where a contractor fails to perform as stipulated, what termination type applies?

Termination for Convenience
Termination for Cause
Termination by mutual consent
Termination under Force Majeure

The correct answer is: Termination for Cause

Termination for Cause is the appropriate action when a contractor does not fulfill their performance obligations as specified in the contract. This type of termination is typically invoked when a contractor engages in substantial breach of contract, such as failing to meet deadlines, delivering substandard work, or violating terms agreed upon. It serves to protect the interests of the party who is impacted by the contractor's failure to perform. In cases where termination for cause is executed, it allows the non-breaching party to end the contract without any penalty, seek damages for the breach, and potentially pursue other remedies. This method underscores the serious consequences of failing to adhere to contractual obligations, thus maintaining accountability within contractual relationships.