Termination for convenience allows the owner to end the contract without alleging any breach, for any reason or no reason. The owner exercises this right by sending a written notice; no cure period is required because no default is asserted. In return, the owner must pay the contractor for: all work completed through the termination date, demobilization costs, restocking fees on canceled material orders, and a defined termination fee or lost profit on unbuilt work (the specific compensation formula is in the contract).
Federal contracts always include termination for convenience under FAR. Most modern private contracts include it as well. The clause protects the owner against being locked into a project that becomes financially unworkable, that loses regulatory approval, or that the owner simply changes its mind on. The contractor should always confirm the convenience-termination compensation formula before signing; some contracts provide reasonable lost-profit recovery, others limit recovery to actual costs incurred (which can be inadequate if the project terminates early in execution).