FAR and DFARS › FAR Part 49: Termination of Contracts
FAR 49.002 Applicability.
The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.
In plain English
This section explains when the termination for convenience and default rules in FAR Part 49 apply. It generally covers contracts that allow termination for convenience or default, but excludes commercial product and service contracts awarded under Part 12, which follow different termination policies. It also provides guidance for settling subcontracts terminated due to prime contract modifications and for evaluating subcontract settlements for reimbursement under cost-reimbursement contracts.
Applies to: Government contracts that provide for termination for convenience or default, and subcontract settlements resulting from prime contract modifications
What it requires
- Contractors shall use this part, unless inappropriate, to settle subcontracts terminated as a result of modification of prime contracts.
Key terms: termination for the convenience of the Government · default of the contractor · commercial product and commercial service contracts · subcontracts terminated · settlement proposal
Written by AI from this section's text. A guide, not legal advice: the text below rules.
The text
(a)(1) This part applies to contracts that provide for termination for the convenience of the Government or for the default of the contractor (see also 12.403 and 13.302-4).
(2) This part does not apply to commercial product and commercial service contracts awarded using part 12 procedures. See 12.403 for termination policies for contracts for the acquisition of commercial products and commercial services. However, for contracts for the acquisition of commercial products and commercial services, this part provides administrative guidance which may be followed unless it is inconsistent with the requirements and procedures in 12.403, Termination, and the clause at 52.212-4, Contract Terms and Conditions— Commercial Products and Commercial Services.
(b) Contractors shall use this part, unless inappropriate, to settle subcontracts terminated as a result of modification of prime contracts. The contracting officer shall use this part as a guide in evaluating settlements of subcontracts terminated for the convenience of a contractor whenever the settlement will be the basis of a proposal for reimbursement from the Government under a cost-reimbursement contract.
(c) The contracting officer may use this part in determining an equitable adjustment resulting from a modification under the Changes clause of any contract, except cost-reimbursement contracts.
(d) When action to be taken or authority to be exercised under this part depends upon the amount of the settlement proposal, that amount shall be determined by deducting from the gross settlement proposed the amounts payable for completed articles or work at the contract price and amounts for the settlement of subcontractor settlement proposals. Credits for retention or other disposal of termination inventory and amounts for advance or partial payments shall not be deducted.
Sections it refers to
← 49.001 Definitions. · 49.100 Scope of subpart. →
Rule changes for FAR Part 49
- Federal Acquisition Regulation: Revolutionary Federal Acquisition Regulation Overhaul Parts 3 and 49 ↗ · proposed 2026-06-23 · comments due 2026-07-23
- Federal Acquisition Regulation; Technical Amendments ↗ · final rule 2024-12-16 · effective 2025-01-03
Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.