All contracts should include a provision that allows the acquiring entity to terminate a contract for convenience. Such a clause incorporates into the contract the doctrine of executive necessity that recognises governments may need to break contracts because of a change of policy or other similar circumstances.

This means that the terminating party does not need to give a reason for the termination and there does not need to have been a default by the other party. These clauses usually specify the type and amount of damages that will be payable by the party terminating the contract to the other party.

To assist in giving effect to the need for all procurements to achieve value for money, it is good practice for all contracts to specify an end date. In contracts which include an option for extension, the end date will generally be a date beyond which any contract extension option can no longer be exercised. The option to extend should be at the sole discretion of the Commonwealth.

The option to extend a contract should be at the sole discretion of the Commonwealth.

The management of contracts with an option for extension is discussed further in Part Five.