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Terminating the contract

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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