Many commercial contracts and licences are intended to govern long-term business relationships, but disputes can arise when the agreement does not clearly set out how and when it can be brought to an end. A recent Court of Appeal decision in Zaha Hadid[1] has provided important guidance on the distinction between contracts that are intended to last indefinitely and those that are truly perpetual, highlighting the importance of carefully drafted termination provisions.
The case concerned a trade mark licence, but the decision will have implications for a range of licences and agreements.
The precise wording of the licence on termination was “This agreement shall commence on the Effective Date and shall continue indefinitely, unless terminated earlier in accordance with this clause 12.” That clause went on to give only the licensor the right to terminate for breach, insolvency, etc
The High Court had decided that, because the licence contained no term giving the licensee a right to terminate, then the licensee was locked into the licence for ever.
The Court of Appeal considered a number of previous cases and emphasised that any decision had to take into account the particular circumstances of the contract or licence. It considered whether it was the common intention of the parties that the contract should run in perpetuity or not. If it was not intended to be perpetual and there was no other specific clause on duration, the duration would be indefinite. If the contract was indefinite then it must be possible to bring it to an end at some unspecified time in the future.
Termination Rights in Indefinite Agreements
Taking into account the fact that the licence used the term “indefinitely”, the court decided that a power to terminate the licence by either party on reasonable notice should be inferred. The court left open the question of what “reasonable” notice would be, but the licensee had contemplated that 12 months’ notice would be reasonable.
The take away point from the case is that, when negotiating a contract or licence, there needs to be a clear position on the respective termination rights of the parties. As we have seen, even where a licensee or counter-party is not given a right to terminate, in certain circumstances a right to terminate on reasonable notice may be inferred.
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[1] Zaha Hadid Ltd – v- The Zaha Hadid Foundation 2026 EWCA Civ 192