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What is reasonable notice when a contract is silent on term and termination?
16 June 2014

Where a contract is silent on term and termination, the length of notice that the courts consider to be reasonable for termination will depend on the circumstances of each case and the facts in existence at the time notice was given.

In Hamsard 3147 Limited (t/a Mini Mode Childrenswear) v Boots UK Limited [2013] EWHC 3251 (Pat) the High Court provided a list of five principles for assessing what constitutes reasonable notice where the contract is silent as to the term and the termination rights:

  • What is considered a reasonable notice period will depend on the particular facts of the case and therefore previous case law is of limited assistance.
  • The general circumstances and practices of the trade in which the parties operate may help provide background as to what parties to such contracts may consider reasonable.
  • What is considered reasonable should be assessed at the time when the notice was given, not the time at which the contract was entered into.
  • The facts at the time the contract was entered into are still relevant. Implying the requirement to give reasonable notice of termination is intended to serve the common purpose of the parties, which is a matter to be determined as at the date of the contract.
  • The degree of formality between the parties is an important factor. If the relationship is more informal, the reasonable notice period is likely to be shorter than if the relationship is a formal one.

The judge rejected Hamsard's argument that there was an implied term obliging the parties to act in good faith, as it was not obvious that the parties intended this duty to apply to what was essentially an interim agreement between them.

Due to the number of factors that are taken into consideration by a court and the uncertainty of their outcome, it is always better to make it clear in the contract what each party's termination rights are and to ensure that termination rights both for cause and without cause are considered by the parties, with the applicable notice periods.

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Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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