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FAR and DFARS › FAR Part 49: Termination of Contracts › Subpart 49.4

FAR 49.406 Liquidation of liability.

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 says that under the contract, both the contractor and its surety are liable to the Government for damages resulting from termination. The contracting officer must first use retained progress payment percentages and any progress payments owed for work completed before termination to pay down that liability. If those amounts are not enough, the contracting officer must take steps to recover the remaining amount from the contractor and the surety.

Applies to: Contractors and their sureties under terminated Government contracts

What it requires

  • The contracting officer shall use all retained percentages of progress payments and any progress payments due for work completed before termination to liquidate the contractor's and surety's liability.
  • If retained and unpaid amounts are insufficient, the contracting officer shall take steps to recover the additional sum from the contractor and the surety.

Key terms: liquidation of liability · surety · retained percentages · progress payments · termination

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

The text

The contract provides that the contractor and the surety are liable to the Government for resultant damages. The contracting officer shall use all retained percentages of progress payments previously made to the contractor and any progress payments due for work completed before the termination to liquidate the contractor's and the surety's liability to the Government. If the retained and unpaid amounts are insufficient, the contracting officer shall take steps to recover the additional sum from the contractor and the surety.

← 49.405 Completion by another contractor. · 49.501 General. →

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 49.406 Liquidation of liability · SpendQuery