Corporate policy is all well and good and very noble, but corporate policy will not be Works Information or form part of the contract with the Contractor. If you need to terminate then you can. Obviously not something you want to do, but you may need to. Section 9 of the contract will ensure that the Contractor is dealt with fairly, depending on the reason for terminating.
I would echo Glenn’s comment.
Also in legal rules/ principles of interpretation, the specific over rides the general, so you could say the Employer has a specific wish to terminate and they should do it through the specific clauses of the contract that cover this. So they act as stated in the contract “and in a spirit of mutual trust and co-operation” i.e. given where they are, they terminate in an open manner, cooperatively etc. , but they still follow the detail of the contract !