Contracts: terminating the contract

A High Court judge has provided a useful list of five principles for assessing what is a reasonable notice period where a contract has no defined term and is silent on termination rights. The judge had to consider what a reasonable notice period was to terminate a contract for the supply of children's clothing. He found that a nine month notice period was reasonable in the circumstances. However, the real interest of the decision is the judge's clear formulation of principle. The five principles are:

• Each decision turns on its facts.
• General circumstances and practices of the trade may be relevant.
• What is "reasonable notice" is to be judged as at the time when the notice is given.
• The circumstances pertaining at the time of the contract are still relevant.
• The degree of formality in the relationship is a very important consideration.