Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55Jesper specialises in corporate litigation and governance
jesper.nooij@russell.nl +31 20 301 55 55In principle, a continuing performance agreement can always be terminated, even if no arrangements have been made in this regard. But you can’t just do it. What do you need to take into account when terminating the agreement? And what if you want to deviate from the arrangements made about terminating the agreement?
Terminating continuing performance agreements has been a hot topic for many years. This was evident, for example, in the recent case of Heineken Nederland v Jumbo. In this case, Heineken argued that Jumbo could not simply terminate the continuing performance agreement between them and had to continue selling Heineken beer. We will return to the question of whether the court agreed with this later. But how does the termination of continuing performance agreements work? And what exactly is a continuing performance agreement? We will address these questions in this blog.
The characteristic feature of a continuing performance agreement is that the parties undertake to perform continuous, repeated or successive services over a definite or indefinite period of time. The service provided by the parties is not a one-off, but continues or is repeated several times, such as a contract for the supply of electricity or a magazine subscription. Some types of continuing performance agreements are subject to special provisions in law, such as rental agreements, agency agreements and employment contracts. This blog focuses on “unnamed” continuing performance agreements, which are subject to the general rules of contract law.
There are no specific legal provisions governing the termination of continuing performance agreements. Therefore, each agreement must be assessed individually to determine whether it can be terminated, what notice period must be observed and whether compensation is due for the termination. The following types of long-term agreements can be distinguished when it comes to the method of termination:
We will discuss the termination of these different variants on the basis of a ruling by the Dutch Supreme Court.
Fixed-term contracts with a termination clause can be terminated in line with the termination clause. The clause may include a notice period, compensation or substantial grounds that must be met before termination is permitted. However, it is possible that the principles of reasonableness and fairness impose further requirements on the termination. This could include substantial grounds for termination, a longer notice period than agreed or an offer to pay compensation. However, this only applies in exceptional circumstances.
In principle, a fixed-term contract without a termination option cannot be terminated. After all, the parties have agreed on a specific term without the possibility of early termination and are therefore bound by this. Only in special, compelling cases can the agreement be terminated before the agreed end date. This could include a situation where the other party systematically refuses to deliver or pay, despite repeated reminders.
An indefinite-term continuing performance agreement with the option to terminate can, like a fixed-term continuing performance agreement with the option to terminate, be terminated in line with the agreed termination provisions. These may include a notice period, compensation or substantial grounds that must be met. For this variant too, further requirements may be imposed on the termination on the grounds of reasonableness and fairness, which go beyond any requirements in the termination clause itself. Again, this only applies in exceptional circumstances.
Finally, there is the indefinite term agreement without termination clause. Unlike the fixed-term agreement without a termination clause, this contract is in principle terminable, even if there is no termination arrangement. Further requirements may apply to the termination, such as a substantial ground for termination, a notice period or compensation. When this is the case has been elaborated on, particularly in case law. Even if the parties intended the agreement to be non-terminable, the agreement may be terminated if continuation of the agreement cannot be reasonably expected of one of the parties on the grounds of reasonableness and fairness.
To make matters even more complicated, depending on the circumstances, compensation may have to be offered to the other party immediately upon termination. Failure to offer compensation may, under certain circumstances, mean that the termination is not valid. The absence of an offer may also be a reason for the court to award a higher termination compensation, as recently determined by the Supreme Court. The amount of compensation must be determined on the basis of, among other things, lost investments by the other party. Whether compensation must actually be offered also depends on the circumstances of the case.
How does it work in practice when a continuing performance agreement for an indefinite period without a termination clause is terminated? Heineken Nederland has been supplying beer to Jumbo for decades on the basis of a verbal agreement. Every year parties agree on prices and joint promotional campaigns. In the autumn of 2023, Jumbo announced that it wanted to purchase Heineken’s products through a European purchasing organisation from then on and that the agreement would not be continued. On 31 January 2024, Jumbo definitively terminated the partnership, but continued to purchase beer from Heineken Nederland through the purchasing organisation. In March 2025, Jumbo announced that it only wanted to purchase a quarter of the usual quantity.
According to Heineken Nederland, this was an invalid termination and it went to court to enforce Jumbo to continue purchasing Heineken beer in the usual quantities. The court ruled that Jumbo was free to terminate the agreement, but that the notice period was indeed unreasonable. In practice, however, Jumbo continued to purchase beer from Heineken for another year and a half after the termination in November 2023, albeit in smaller quantities. Due to a lack of information, the court is unable to rule on whether this is a reasonable notice period. Heineken will therefore have to claim compensation in separate proceedings if it wishes to do so for the lack of a longer notice period.
In principle, continuing performance contracts can be terminated, with the exception of fixed-term contracts without a provision for early termination. However, it may be necessary to have compelling reasons for the termination or to offer compensation and/or observe a notice period upon termination, but this depends on the circumstances of the case.
Has your continuing performance agreement been terminated? Or do you want to terminate such a contract yourself and are you unsure of your rights? We are happy to help you. We can also help you prevent these kinds of issues by addressing them in the contract from the outset. Please contact us:
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