Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55In principle, it is possible to terminate continuing performance agreements, even if the parties have made no arrangements to that end and the law does not provide for a termination arrangement. Sometimes the circumstances do require that there must also be substantial grounds for giving notice, possibly in combination with a notice period and the payment of financial compensation.
Continuing performance agreements are characterized by having effect for a longer period of time. A continuing performance agreement does not require a one-off performance, but rather successive or continuous performance. In most continuing performance agreements parties have provided for a termination arrangement. If the parties have not agreed on a termination arrangement, a statutory arrangement may apply, as applies to rental or agency agreements. In addition, continuing performance agreements can be concluded for a fixed period. In principle, these agreements end on the agreed date. But what if the agreement does not include a termination regulation and there cannot be fallen back on statutory arrangements either?
Whether a continuing performance agreement without termination arrangement can be terminated depends on whether termination is reasonable in the given situation. Various factors play a role in this.
In the majority of cases where both the law and the agreement do not provide for a termination arrangement, termination is possible. However, the greater the interest of the terminated party in the continuation of the agreement, the more should be offered by the terminating party.
What the terminating party must offer depends on the circumstance of the case. The circumstances may require that
Though termination is in principle possible (whether or not with notice period and/or financial compensation), sometimes the circumstances may require that there must be a substantial ground. This may be the case if the terminated party suffers financial loss, for example because it is not possible to recoup specific or recently made investments.
Substantial grounds for the terminating party may include: policy changes, non-performance of the terminated party or external circumstances such as, for instance, a trade ban. In these cases the continuing performance agreement can be terminated, even if this sometimes has far-reaching negative consequences for the terminated party. For example, breach of contract, such as the sale of competing products in contradiction to the agreement, may even be a reason to terminate the contract without notice and compensation.
When one party has invested a lot in the contractual relationship, it can be unreasonable for the other party to suddenly terminate the agreement. The duration of the agreement plays a role in the determination of the notice period. A long trade relationship cannot be terminated just like that, but can also mean that the terminated party has had sufficient time to recoup its investments.
A notice period can also be reasonable if there is a dependency relationship in which the terminating party is a large or the only trading partner of the other party. A notice period gives the other party time to find a new source of income. If, on the other hand, there is no dependency relationship, this may be an indication that no (long) notice period is required.
The payment of financial compensation or damages usually occurs if the contract has been terminated in a valid manner, but for example the notice period does not sufficiently compensate the interests of the terminated party. As it is in principle possible to terminate the continuing performance agreement, in the case of an already terminated agreement compensation will be chosen rather than an extension of the notice period.
Would you like advice about the termination of an agreement? Would you like to learn more about (continuing performance) agreements? Please contact us:
In 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 agreements made about terminating the agreement?
On 28 June 2025, the European Accessibility Act will come into force. From that data, digital products and services must also be accessible to people with disabilities. Which companies, products and services does the Act apply to? What disabilities should you take into account? What are the consequences of not complying with the Act?
If a contract has ended, there may still be obligations you want your contract partner to fulfil, such as warranties or confidentiality. You can regulate this through survival clauses. What should you look out for when including such clauses?
The franchise agreement and the distribution agreement are very similar, but there are also important differences. What are the consequences if you conclude a franchise agreement when it is actually a distribution agreement or vice versa? How can you avoid this misunderstanding?
The shareholders’ agreement is the most important agreement entered into between shareholders and the company. What matters should you cover in this agreement?
The use of general terms and conditions is something companies can no longer do without. Contracting parties refer to their own general terms and conditions in small print, often containing favorable clauses for their own benefit. But what is the power of general terms and conditions? And what should be considered when using them?
