SpendQueryBeta

FAR and DFARS › FAR Part 49: Termination of Contracts › Subpart 49.1

FAR 49.109-2 Reservations.

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 tells the Termination Contracting Officer (TCO) how to handle a settlement agreement that leaves some rights or demands unresolved. The TCO must reserve those excepted items in the agreement, avoid creating new rights, mark the agreement, keep funds available, and later settle the reserved items separately. It matters to contractors because it explains how unresolved claims are preserved and later resolved after a termination settlement.

Applies to: Termination Contracting Officers handling settlement agreements with reservations

What it requires

  • Reserve in the settlement agreement any rights or demands of the parties that are excepted from the settlement
  • Ensure the wording of the reservation does not create rights beyond those existing before the settlement agreement was executed
  • Mark each applicable settlement agreement with 'This settlement agreement contains a reservation' and retain the contract file until the reservation is removed
  • Ensure sufficient funds are retained to cover complete settlement of the reserved items

Key terms: TCO · settlement agreement · reservation · reserved items · contract file

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

(a) The TCO shall—

(1) Reserve in the settlement agreement any rights or demands of the parties that are excepted from the settlement;

(2) Ensure that the wording of the reservation does not create any rights for the parties beyond those in existence before execution of the settlement agreement;

(3) Mark each applicable settlement agreement with “This settlement agreement contains a reservation” and retain the contract file until the reservation is removed;

(4) Ensure that sufficient funds are retained to cover complete settlement of the reserved items; and

(5) At the appropriate time, prepare a separate settlement of reserved items and include it in a separate settlement agreement.

(b) A recommended format for settlement of reservations appears in 49.603-9.

Sections it refers to

Sections that refer to it

  • 49.603-1 Fixed-price contracts—complete termination.
  • 49.603-2 Fixed-price contracts—partial termination.
  • 49.603-3 Cost-reimbursement contracts—complete termination, if settlement includes cost.
  • 49.603-4 Cost-reimbursement contracts—complete termination, with settlement limited to fee.
  • 49.603-6 No-cost settlement agreement—complete termination.
  • 49.603-7 No-cost settlement agreement—partial termination.
  • 49.603-8 Fixed-price contracts—settlements with subcontractors only.

← 49.109-1 General. · 49.109-3 Government property. →

Rule changes for FAR Part 49

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

FAR 49.109-2 Reservations · SpendQuery