Businesses often enter into long-term commercial agreements without considering what happens when the relationship needs to come to an end. While it is usually straightforward where a contract specifies a fixed term and notice period, the position can become less certain where an agreement simply states that it will continue “indefinitely”.

A recent Court of Appeal decision provides useful guidance on this issue and highlights the importance of getting termination provisions right when drafting commercial contracts.

The Zaha Hadid case

In Zaha Hadid Limited v The Zaha Hadid Foundation [2026] EWCA Civ 192, the Court of Appeal considered whether a trade mark licence could be terminated by the licensee despite the agreement containing no express termination right for that party.

The agreement, entered into in 2013, allowed Zaha Hadid Limited, the architecture practice founded by Dame Zaha Hadid, to use the “ZAHA HADID” trade marks in return for a royalty of 6% of relevant net income. Following Dame Zaha Hadid’s death in 2016, ownership of the trade marks passed to The Zaha Hadid Foundation.

The licence stated that it would continue “indefinitely, unless terminated earlier”. However, the express termination provisions gave the licensor, rather than the licensee, the ability to terminate.

When Zaha Hadid Limited sought to renegotiate the royalty arrangements, it argued that it was entitled to terminate the licence by giving reasonable notice. The Foundation disagreed, arguing that the agreement was effectively perpetual and that only the Foundation had an express right to terminate. The High Court initially agreed with the Foundation. The Court of Appeal, however, reached a different conclusion.

Court of Appeal ruling

A key distinction drawn by the Court of Appeal was between an indefinite contract and a perpetual contract.

An agreement of indefinite duration does not have a fixed end date, but that does not necessarily mean that the parties intended to be bound forever. By contrast, a perpetual agreement is intended to continue without an end. The Court of Appeal concluded that the licence was intended to be of indefinite rather than perpetual duration. It therefore held that the agreement could be terminated on reasonable notice. It applied the two-step reasoning in Winter Garden Theatre:

1. Construe the parties’ common intention as to whether the agreement was meant to run in perpetuity. If it was not and no other duration is specified, the duration is indefinite; and

2. If indefinite, infer that all parties have the ability to terminate on reasonable notice, as that is the only way to give effect to a common intention that the contract is not perpetual.

In reaching that conclusion, the Court considered the wording of the agreement as a whole and its commercial context. The Court considered it difficult to conclude that the parties objectively intended to create a commercial arrangement which could bind the parties indefinitely without any means of bringing it to an end.

The Court also rejected the argument that the express termination rights given to the Foundation necessarily meant that the Company had no corresponding right to terminate. The existence of a termination right for one party does not, by itself, prevent the court from finding that the other party has a right to terminate on reasonable notice.

The Court further confirmed that what amounts to “reasonable notice” will depend upon the circumstances at the time notice is given, rather than simply the circumstances which existed when the contract was originally entered into.

What does this mean for businesses?

The decision is particularly relevant to businesses entering into long-term arrangements, including licences, distribution agreements, services agreements, agency arrangements and other continuing commercial relationships.

It demonstrates that the absence of an express termination right does not necessarily mean that a party is permanently locked into a contract. However, relying on a court to determine whether an implied or inferred right to terminate exists can create significant uncertainty and expense.

Businesses should therefore consider:

· Whether the agreement has a fixed term. If it does not, the contract should make clear how and when the relationship can be brought to an end.

· Whether termination rights are mutual. If only one party has an express termination right, consider whether that reflects the parties’ actual commercial intentions.

· What notice period should apply. A clearly defined notice period is preferable to leaving the parties to argue later about what constitutes “reasonable notice”.

· What happens following termination. Consider provisions dealing with outstanding payments, intellectual property, confidential information, stock, customer relationships and any continuing obligations.

· Whether the commercial relationship may change over time. A termination mechanism which is appropriate when an agreement is signed may become unsuitable several years later.

The decision is a useful reminder that the wording of a commercial contract matters. While the courts may be able to provide an answer where a contract is silent or ambiguous, businesses should avoid leaving fundamental questions about the duration and termination of an agreement to future interpretation.

If your business is entering into a long-term commercial agreement, or you are unsure whether an existing contract can be terminated, please do not hesitate to contact us at commercial@berrysmith.com or on 029 2034 5511.