Q&As

What termination notice period can be implied into a verbal business-to-business contract for services?

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Published on LexisPSL on 27/11/2018

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • What termination notice period can be implied into a verbal business-to-business contract for services?
  • Implied terms

What termination notice period can be implied into a verbal business-to-business contract for services?

The Practice Note: Termination and expiry of contracts sets out the law, guidance and practice relating to terminating an agreement, including the practical and legal consequences of the method chosen to end the agreement, whether the termination has arisen because of a contractual provision to terminate, by way of rescission of the agreement or because of a breach of contract.

While it is possible for a business-to-business contract to not expressly provide for termination rights, this will not override the right of either party terminate the contract with reasonable notice.

In the past, there was a rebuttable presumption that if a contract had no provisions about term or termination it was permanent and irrevocable. Nowadays, the courts tend to look at the agreement to see what the parties' intention was. The general rule is that a contract can be terminated on reasonable notice (except for certain statutory exceptions such as commercial agency arrangements).

What is reasonable will depend on the circumstances; the factors that a court will generally consider were summarised in the case of Jackson Distribution Limited v Tum Yeto Inc:

  1. duration of the contract or arrangement between the parties—the longer the arrangement, the longer the notice period required, although it depends on the type of arrangement. If it has been an informal

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