Authority/Reference(s) State of Texas Procurement and Contract Mangagement Guide; Texas Government Code§ 552.374
Revision Date June 1, 2020


Contract termination relieves both parties from further obligations based on the agreed terms and conditions of the contract. Contract termination may occur for various reasons throughout the life of the contract. Contact staff are responsible for ongoing evaluation of events surrounding the performance of a contractor in order to determine whether a contract should be terminated.

A contract termination occurs when one of the following terms are met:

  • The term of the contract expires;
  • Services defined under the contract have been completed prior to the expiration date and the contract is no longer needed;
  • DFPS terminates for convenience;
  • Both parties mutually agree to terminate the contract; or,
  • Either party terminates the contract for cause.

Most contracts terminate when the contract term expires, as planned, and require no termination notice, or action taken in CAPPS FIN 9.2. While a termination notice is not required for contracts that expire, contract staff must complete the applicable Contract Termination and Closeout activities.

DFPS has the ability to terminate a contract for convenience when it is in DFPS’s best interest even though the contractor may be performing in a satisfactory manner.

Termination for cause occurs when attempts to assist a contractor failing to perform or make progress have been ineffective. Once contract staff have concluded that the contractor is unable to perform, make progress, or has breached the contract in any way, DFPS may terminate a contract for cause. This may be done when the contractor submits falsified documents, fraudulent billings, or fails to disclose contracting information when required.

DFPS may immediately terminate a contract for cause if terminating the contract is not disallowed by law.

Under a termination for cause, DFPS is not liable for the contractor's costs related to undelivered work and is entitled to repayment of any advance payments and of any progress payments for such work that has not yet been completed as of the date of termination.

Contracts terminated for convenience or cause must have a legally approved notice of termination and written settlement agreement. The person who signed the contract must also sign the termination notice.

The contractor’s right to terminate is documented in the contract’s terms and conditions.