08 November 2013

Contracts without express termination provisions and, in particular, unwritten contracts with implied terms are usually terminable on reasonable notice. So what is reasonable notice (ie how long do you have to give to terminate such a contract)?

Inevitably 'reasonable notice' is fact dependent in each case. Reasonableness requires the judge to consider the actual arrangements/ contracts entered and the nature of the parties.

Nonetheless, the court has given some guidance on matters to be considered in Hamsard 3147 v Boots.

When assessing how long is reasonable, commercial parties and the court should consider:

  • the general circumstances and practices of the relevant trade (ie market practice)
  • the test for what is 'reasonable' is, as a matter of law, assessed at the time when the notice is given, although the prevailing conditions at the time of the contract are also relevant
  • the degree of formality of the arrangement – the more formal the contract the more likely a substantial period should be required
  • the knowledge of the parties and the timings of negotiations about termination (ie if the parties knew the relationship was likely to come to an end before a formal notice was given this can be relevant to the reasonableness of the period given).

In this specific case, which dealt with the supply clothing supply agreement, nine months was a reasonable period of notice.

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Andrew Burnette Partner

  • Dispute Resolution
  • Professional Negligence
  • Banking Disputes

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