What You Can Recover When a Contract Is Terminated

Termination is not the end of the commercial conversation - it is the start of a valuation exercise. The day work stops, a new set of questions opens up: what have you actually earned, what can you take away, what are you owed for winding down, and can you recover the profit you would have made on the rest of the job. The answers are not fixed. They turn on the basis of termination and on the quality of your records, and contractors routinely leave money on the table simply because they never built the number properly.

The basis of termination changes everything

Before you value anything, establish why the contract ended, because that single fact reshapes the entire recovery. Broadly, termination comes in two flavours: for cause, where one party ends the contract because the other has defaulted, and for convenience, where a party - usually the employer - ends it simply because it chooses to, with no default by you. The two produce very different entitlements, and the gap between them is often the difference between recovering your lost profit and not. Our companion guide to termination for cause versus termination for convenience sets out the mechanics; this article focuses on what lands in your pocket at the end.

Under FIDIC, employer termination sits in Clause 15 and contractor termination or suspension in Clause 16, with the payment consequences spelled out in each. The heads of recovery below apply across most standard forms, but always read the specific valuation-on-termination provisions in your contract, because the wording controls.

Work executed but not yet paid

The foundation of any termination account is the value of work properly executed up to the termination date and not yet paid for. This is the same valuation exercise as a normal interim certificate, run one final time as at the cut-off. Everything you have built, installed, or completed that has not already been certified and paid belongs here. Precision matters: measure the actual state of the works at termination, not the last agreed valuation, because progress since the previous certificate is real money.

This is where a disciplined monthly valuation habit pays off. Contractors who have kept their interim payment certificates current can strike the final work-done figure quickly and defensibly. Those who let valuations drift spend the termination period reconstructing what they built and losing the argument on anything they cannot evidence.

Work in progress deserves particular care. Part-completed activities that were never certified because they had not reached a payment milestone still represent value you have created, and they belong in the account measured at their actual state on the termination date. Do not let a valuation cut-off designed for milestone payments strip out genuine progress that fell between milestones.

Materials and plant - on site and ordered

Beyond work in place, you can usually recover for materials and goods. This falls into two groups. First, materials and goods delivered to site but not yet incorporated - these are often already the subject of payment provisions and pass into the account at their proper value. Second, and frequently overlooked, materials specifically ordered or manufactured for the works that you are now committed to pay for even though the contract has ended. If you have placed firm orders or paid deposits for bespoke items, that committed cost is a recoverable head under many termination clauses, subject to transferring title or delivering the goods.

Plant and temporary works are a separate question. You generally cannot charge the capital value of your own plant to the account, but the cost of removing it - and in some cases hire commitments you cannot cancel - can feed into the demobilisation head below. Read the clause carefully, because forms differ on whether constructional plant transfers to the employer or returns to you.

Demobilisation and repatriation

Winding down a project costs real money, and a well-drafted termination account captures it. Demobilisation covers removing plant, equipment, and temporary works from site, clearing and making the site safe, and closing out subcontracts. On international projects - common across the Gulf and wider EPC market - repatriation of personnel and equipment can be a substantial figure: flights, visa close-out, shipping of plant, and the cost of releasing labour. These are direct consequences of the termination, and where the termination is not your fault they are ordinarily recoverable.

One caution: you are expected to demobilise reasonably and mitigate cost. Running up avoidable expense, or dragging out the wind-down, invites the other side to challenge the figure. Document the demobilisation as a controlled exercise with a clear rationale for each cost. Where you have released subcontractors and suppliers, their own reasonable close-out costs may flow up to you and into the account, so capture the whole chain rather than only your own direct spend. On a Gulf EPC package with a mobilised international workforce, the repatriation head alone can run to a meaningful share of the outstanding value, and it is routinely underclaimed simply because it is assembled in haste.

Loss of profit - the head that depends entirely on the basis

This is the head that turns on why the contract ended. If you were terminated for convenience, you have done nothing wrong, and many contracts recognise that fairness requires compensating you for the profit you would have earned on the work you were prevented from completing - loss of profit on the unperformed balance. The degree of this entitlement varies by form and by wording, so the contract text is decisive, but the principle is that convenience termination should not strip you of the bargain you struck.

If you terminated for the employer's default - for non-payment, for instance - you may also recover loss of profit on the remaining works, because the termination was forced on you by the other party's breach. But if you were terminated for your own default, the position reverses sharply: not only is loss of profit generally unavailable, the account may run against you, because the employer can set off the additional cost of completing the works with a replacement contractor. In that scenario the termination account can produce a net sum you owe, not a sum you recover. The table summarises the pattern.

Basis of termination | Work done and materials | Demobilisation | Loss of profit on unbuilt work --- | --- | --- | --- For convenience (employer choice) | Recoverable | Recoverable | Usually recoverable Contractor terminates for employer default | Recoverable | Recoverable | Often recoverable Employer terminates for contractor default | Recoverable, but subject to set-off | Limited | Not recoverable; completion costs set off against you

Building the number and protecting it

A termination account is only as strong as its evidence. From the moment termination looks likely, treat record-keeping as the priority: photograph and measure the state of the works, assemble your orders and delivery records for materials, log demobilisation costs as they are incurred, and keep the correspondence that establishes the basis of termination. The party with the contemporaneous records controls the negotiation, because assertions without documents rarely survive scrutiny.

Because the recoverable set swings so hard on the basis of termination, and because the account can run either way, this is rarely a document to prepare alone under time pressure. Structuring the account correctly - and defending it if the other side disputes the basis - is exactly the work our dispute recovery service supports. Getting the framework right early is what converts a chaotic exit into a recovered number.

Frequently Asked Questions

Can I claim loss of profit if my contract is terminated?

It depends entirely on why it was terminated. If the employer ends the contract for convenience - by choice, with no default by you - many forms allow you to recover the profit you would have earned on the work you were prevented from completing, because it would be unfair to strip you of your bargain. The same often applies if you terminated because of the employer's breach. But if you were terminated for your own default, loss of profit is generally not recoverable, and the account may instead run against you for the cost of completing with someone else. The basis of termination is the decisive fact.

What can I recover for materials I already ordered but had not used?

Materials and goods delivered to site typically pass into the termination account at their proper value. More importantly, materials specifically ordered or manufactured for the works that you are now committed to pay for - firm orders, bespoke fabrication, or paid deposits - are a recoverable head under many termination clauses, even though the contract has ended, usually on condition that you transfer title or deliver the goods. This head is frequently overlooked. Assemble your purchase orders, supplier commitments, and payment records early, because you can only recover what you can evidence you were genuinely committed to pay.

Are demobilisation and repatriation costs recoverable?

Where the termination is not caused by your default, yes, they are usually recoverable as a direct consequence of the contract ending. Demobilisation covers removing plant and temporary works, making the site safe, and closing out subcontracts; on international projects, repatriation of personnel and equipment - flights, shipping, visa close-out, releasing labour - can be a significant figure. The key condition is reasonableness: you are expected to demobilise efficiently and avoid running up unnecessary cost. Document each item as a controlled expense with a clear rationale, because an inflated or poorly evidenced demobilisation claim is the easiest head for the other side to challenge.

How do I value the work I completed before termination?

Run the same valuation you would for an interim certificate, but strike it as at the exact termination date and measure the actual state of the works rather than relying on the last agreed valuation. All work properly executed and not yet certified and paid belongs in the account. The practical advantage goes to contractors who have kept their monthly valuations current, because they can produce a defensible final figure quickly. If your valuations have drifted, you will spend the termination period reconstructing progress and losing the argument on anything you cannot evidence with measurement, records, or photographs.

Can a termination account leave me owing money?

Yes - most commonly when the employer terminates for your default. In that situation the employer can set off the additional cost of completing the works with a replacement contractor against what you would otherwise recover, and because completion by a new contractor is usually more expensive, the net result can be a sum you owe rather than one you receive. Loss of profit on the unbuilt work is also generally unavailable in that scenario. This asymmetry is exactly why establishing and, where possible, contesting the basis of termination is as important as valuing the individual heads of the account.

Termination turns your project into a valuation, and the size of the number you walk away with is decided by the basis of termination and the records you kept - so master both before you need them.

Note: This article is general information on termination accounts and does not constitute legal advice on any specific termination or recovery.