Termination without cause - Is it better for the Supplier of the Buyer?

The simple answer is that it really depends upon the circumstances of the parties.

There are two types of suppliers. There are supplier that don't have any problems and they are performing well. They may not like termination without cause clauses as they will have to make new sales to backfill the work. There are suppliers that are having major problems performing and are teetering on potential termination for cause. If a supplier feels that they could ever fall into that second category they should welcome it. On the downside they will lose the business. On the up-side it can prevent them from wasting more money trying to perform. If exercised it extinguishes the buyer's right to collect damages. It also usually allows them the right to collect costs of termination which they wouldn't be able to collect if they were terminated for cause. It's that latter situation where the supplier welcomes it as it dramatically will reduce their cost and liability.

As to Buyers, it would all depend upon the reason for the exercise of the termination. If a buyer is exercising the right on a supplier that is performing because their circumstances have changed, clearly that buyer limits the costs on something they no longer may need or want. It does however cost them what they may have already invested and paid for and it costs them the costs of termination they must pay the supplier. There is always a significant costs associated. If the Buyer is exercising the right to terminate without cause because they supplier is simply not performing and they don’t have confidence in them in the future, the only real benefit they get is not having to deal with that supplier and maybe get better assurance that the work will be performed when they use someone else.I've had suppliers that wanted to do their own thing their own way rather than listed to what my company wanted or needed and those I clearly used termination without cause with.The costs to the buyer is what they have paid to date, the costs of termination and whatever it will cost to complete the work. What the prior supplier had done may also have no value and may need to be scrapped.

If the situation is something like switching from one supplier to another by exercising a termination for convenience, the advantage may be to the buyer.In that case the buyer will always need to consider the cost of termination against the benefits they will get from the new supplier to determine if it makes economic sense to switch. Buyers could use the threat of switching as leverage to get price reductions.

In negotiating termination without cause provisions in contracts that don't have firm commitments to purchase such as blanket or master agreements I explain that the termination without cause provision is in their best interest. When they give me that puzzled look I explain that I can effectively do the same thing as terminating the agreement without cause by simply stopping purchasing. The advantage to them is it lets them know that orders won't be forthcoming and that any materials or work that I authorized that they still have will be paid for as part of the termination,.