What is the Amount of a Termination Fee for a Construction Contract?
Rescission is the name for the remedy that terminates the contractual duties of both parties, while reformation is the name for the remedy that allows courts to change the substance of a contract to correct inequities that were suffered. In order to have a rescission, both parties to the contract must be placed in the position they occupied before the contract was made. Courts have held that a party may rescind a contract for fraud, incapacity, duress, undue influence, material breach in performance of a promise, or mistake, among other grounds.
When the parties voluntarily agree to a recission, any termination payments involved will depend on all the facts and circumstances in each case. There is no set or standard formula. It is a matter of negotiation between the parties. Some of the considerations, among others, may include the dollar amount of the contract, any costs, lost wages, lost opportunity or labor already expended due to the formation of the contract. A release may also be included in the termination agreement so that the risk of any potential future claims may be minimized.