An “indefinite” term may not actually mean forever after all. A recent Court of Appeal decision now confirms that even where one party believed a contract was intended to run forever, a court may imply a right to terminate on reasonable notice if no express termination clause exists, if one party later seeks to exit.

This point was tested in Zaha Hadid Limited v Zaha Hadid Foundation. The Court of Appeal overturned the High Court’s earlier ruling on a long‑standing trade mark licence, holding that an agreement that was stated to be “indefinite” could not be interpreted as being a contract that would bind the parties forever. Rather:

  • a contract that is stated to continue indefinitely must still be capable of being terminated by each party; and
  • for a contract to be upheld as continuing forever, it must be expressly stated to be “perpetual”.

This may sound like splitting hairs because “indefinite” and “perpetual” are often taken to mean “lasting forever” when used in a conversational sense. However, in legal terms, there can be a difference. Here, strictly speaking, “indefinite” is taken to mean “until further notice” or “without a fixed end”. As such, whilst the duration of an indefinite contract is an unlimited or unknown period of time, the use of “indefinite” should not rule out the possibility of the contract ending at later date. Rather, indefinite contracts should be regarded as being terminable by either party on reasonable notice even if such termination rights are not included in the drafting. Clearly, what is reasonable may vary greatly from case to case.

For these reasons, if a contract is intended to last forever, it is vital that the term is described as perpetual. This will then prevent a party which has no termination rights in the contract from subsequently arguing that it should be able to terminate an indefinite contract on reasonable notice.

The decision provides a simple but important reminder that terminology matters and of the power of precise drafting. “Indefinite” and “perpetual” may both sound like “forever”, but they have specific and materially different legal meaning.

Applying established authority, the court reinforced the position that the natural inference of an agreement expressed to continue “indefinitely” is that it may be terminated by either party on reasonable notice. The deliberate choice of the word “indefinitely”, rather than “perpetually”, meant the agreement could not be read as locking the parties together forever.  The parties use of “indefinite” was “not a promising start” if the agreement was truly intended to run forever. An indefinite arrangement does not, on its face, exclude termination rights.

Where language with a recognised legal meaning is drafted into a written agreement, parties will be held to have understood such meaning. Care should be taken when drafting using terminology which you might think has the same meaning in everyday language but that has been interpreted and with a well-established materially different legal meaning in a negotiated agreement.

Nothing in the judgment changes the established principle that courts will not rewrite a contract negotiated between two business parties simply to relieve a party which it later regrets. An unattractive deal cannot be escaped by simply implying a termination right. Despite noting that most disputes are resolved by analysing the construction of the agreement and the words on the page, not by inserting terms the parties never included, sometimes, this may mean implying terms that are not expressly included in the interests of ‘business sense’.

Looking at the contract objectively as a whole and the wider commercial context, the Court of Appeal found nothing to support the idea that only the Foundation could terminate, while the Company could not. Over decades, circumstances change. In this case, it made little commercial sense to require the Company to promote the Zaha Hadid brand forever, acknowledging that many things might happen emerge over the decades or centuries following the date of the agreement which might be so detrimental to the brand as to make it seriously disadvantageous to the Company to be obliged to continue to promote the brand. It is why the parties drafted the agreement to be “indefinite”, capable of termination on reasonable written notice.

Careful drafting at the outset is easier than litigating unintended consequences later.

Background and Dispute

The late Dame Zaha Hadid was an architect responsible for some of the world’s most iconic buildings. Including, famously, London Aquatics Centre and Glasow Riverside Museum.

Dame Zaha Hadid owned various trade marks, and such marks were used by her established architectural practice Zaha Hadid Limited (the “Company”) under a trade mark Licence Agreement (the “Agreement”).

The Agreement permitted the Company to use the “Zaha Hadid” name and marks in return for a 6% royalty on net global income and obligations to promote the brand. Following Dame Zaha’s death in 2016, the benefit of the Agreement passed from Dame Zaha Hadid’s estate to the Zaha Hadid Foundation (the “Foundation“). The Company sought to terminate and renegotiate the Agreement, arguing the royalty was too high.

Key provisions included:

“12.1 This agreement shall commence on the Effective Date and shall continue indefinitely, unless terminated in accordance with this clause

12.2 The Licensor shall have the right to terminate this agreement on giving the Licensee not less than 3 months’ written notice of termination.

12.3 Without affecting any other right or remedy available to it, the Licensor may terminate this agreement with immediate effect by giving written notice to the Licensee if… [overdue payment by Licensee, unremedied material breach by Licensee etc.]”

The Foundation had an express right to terminate the Agreement on three months’ notice and additional rights to terminate for breach or insolvency, however, the Company had no express right to terminate the Agreement.

The Company argued that it must have an implied right to terminate on the Agreement on reasonable notice given the indefinite term of the Agreement.

The Foundation disagreed and argued that the Agreement should continue forever unless and until terminated by the Foundation in accordance with its rights under the Agreement.

In addition to the arguments above, the Company argued that the Agreement was void as an unreasonable restraint of trade on the basis that the drafting restricted the Company’s freedom to operate.

High Court Decision

The High Court found in favour of the Foundation. Based on the terms of the Agreement and the wider factual matrix, the High Court held that at the time the Agreement was executed the parties did not intend for the Company to have a right to terminate on reasonable notice and therefore, the right to terminate should not be implied in 2025.In addition, the High Court rejected the Company’s argument in relation to restraint of trade.

The Company appealed the decision of the High Court.

Court of Appeal Decision

The Court of Appeal found in favour the Company and determined that the Company could benefit from an implied right to termination the Agreement on reasonable notice.

The Court of Appeal’s judgment delineates between an agreement intended to run in perpetuity, and one intended to run indefinitely. The judgment was clear that they are fundamentally different things and not synonyms.

  • Perpetual agreement, an agreement that continues forever unless terminated in accordance with its express terms.
  • Indefinite agreement, an agreement that continues for an unspecified period but must therefore be capable of termination on reasonable notice.

The Court of Appeal found that, as a matter of business sense, whilst it was intended to be a long-term relationship, the parties could not have intended the Company to be locked into using the Dame Zaha brand forever. It could not “sensibly be said that the Company was bound to associate itself with and promote Dame Zaha’s architectural identity in 100 years’ time.”

Applying the two stage test in Winter Garden Theatre (London) Limited v. Millenium Productions Ltd [1948] AC 173, the Court of Appeal was clear in its finding that as a matter of construction the parties’ intentions revealed by the deliberate use of the word “indefinite” and giving rise to all the circumstances, the parties intended that the Agreement could therefore, at some point, be terminated by either party on reasonable notice.

What constitutes reasonable notice?

The Court of Appeal confirmed that the extent to which notice is reasonable is fact specific and depends on the circumstances in which notice is given.

By way of illustration the court provided two examples relevant to the instant case.  By way of illustration, the court gave two examples relevant to the present case. It explained that, in the early period after the Agreement was entered into (before Dame Zaha’s death) what constituted reasonable notice could have been a very substantial period, given that the Agreement was intended to provide her with income during her lifetime. By contrast, when the Company sought to terminate in 2024, a twelve‑month notice period was considered reasonable.

The Court of Appeal did not pass judgment in relation to the Company’s argument regarding unreasonable restraint of trade. The rationale being that the court found the Company had an implied right to terminate on reasonable notice and that issues relating to unreasonable restraint of trade should be considered in other cases where such issues were significant.

Practical considerations

Whilst the Court of Appeal decision is highly fact specific, clear drafting of all parties’ termination rights will always be important to ensure clarity for all parties and reduce the risk of implied rights being inferred that parties might not have thought existed when an agreement was entered into.

  • Clear termination rights: carefully consider all scenarios in which any party may wish to terminate the agreement at the point a long-term agreement is entered into, even if the intention is for a long-term relationship. In so doing, consider including a minimum duration and/or a right to terminate on notice for convenience rather than being at the mercy of a court deciding what it considers might be a reasonable period for a termination notice. If permanence is intended, it must be clearly and expressly stated in unequivocal terms.
  • Commercial context: courts will look at a negotiated agreement as a whole and the commercial context, not just a single clause.
  • Terminology: if a contract is intended to last forever, make sure that the term is described as being “perpetual” rather than “indefinite” as these two words actually have different meanings at law. The Court of Appeal judgment is clear; the terms are not interchangeable.
  • Interpretation: when interpreting an agreement, a court will consider all facts and circumstances and whether it makes commercial common sense for a party to be “locked” into an agreement. In this case, the Court of Appeal took the view that it did not make commercial common sense for the Company to be locked into the agreement in 100 years’ time where “many things might have happened or emerged over decades or centuries which might have been detrimental to the brand to make it disadvantageous to the Company to be obliged to continue to promote the brand.” (Examples included architectural style changes and changes in technology and taste.)

Conclusion

Beware of describing long term contracts as being indefinite. Rather, contracts that are intended to last forever must be clearly described as “perpetual”.

Our experienced IP&T team can assist you with drafting, negotiating and interpreting IP licence agreements and long term commercial agreements.