Business Contracts: ‘indefinite’ or ‘perpetual’?
A contract to continue indefinitely was not intended to be perpetual, as it could be brought to an end at some time in the future on reasonable notice. This is a significant clarification by the appeal court and is important for all businesses, and particularly those negotiating longer term contracts.
No fixed term
The contract at issue in Zaha Hadid v The Zaha Hadid Foundation [2026] EWCA Civ 192 was a standard trade mark licence dating back to 2013. One of the parties wanted to continue using the trade mark name (‘ZAHA HADID’), as well as renegotiate the contract terms on the basis that the level of licence fee (6% of all net income) was too high.
The licence specifically stated it would “continue indefinitely, unless terminated earlier” in accordance with specific conditions. But there was no explicit reference to termination by the claimant licensee.
The claimant’s position was that it had the right to terminate the contract on reasonable notice. The defendant disputed that view. A key issue on appeal was the ability of a party to terminate on reasonable notice a contract with no fixed term.
As expected, this was a case of construing the contract terms on the facts in the usual way. After reviewing the authorities, Jackson LJ set out the CA’s general approach as a matter of principle and logic:
- It is a decision as to construction of the parties’ common intention, whether or not the agreement was intended to run in perpetuity (in all or some circumstances).
A contract which is not intended to be perpetual in this sense is indefinite; and the difference is simple: if in perpetuity - there is no room for an inference that it could be terminated on reasonable notice (unless there are express terms).
But an indefinite agreement necessarily “and within its own terms contemplates that it can be brought to an end” at an unspecified time in future.
- The only way to give effect to a common intention that the agreement is of indefinite duration (not perpetual), would be that all parties were able to terminate on reasonable notice.
In essence, an indefinite contract is fundamentally different from a perpetual contract – a point that all businesses should carefully note.
In the Zaha Hadid case, the first and obvious point was that the word used is ‘indefinitely’ and not ‘perpetually’. On its face, the contract duration was indefinite as it did not purport to lock the parties together forever.
Further, to construct ‘indefinitely’ as ‘perpetual’ here would mean the contract was literally intended to go on for ever unless terminated by Dame Zaha or her successor in title; but that would not make business sense for either party.
It made much more sense to hold that the parties intended this contract to last for an indefinite period, rather than in perpetuity. A power to terminate it by either party on reasonable notice should therefore be inferred.
What does this mean?
Certainty in contract drafting is vital – a point that cannot be made often enough. Any ambiguity around the intended duration and termination of a contract must be dealt with to avoid similar costly disputes.
There are situations in which contracts are intended to be indefinite and others that may be intended to be perpetual (or to be terminated by one party only). Ensuring the parties’ intentions are clear and unambiguous, using appropriate express terms, is vital.
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