Legal systems render the obligations null and void sine die. Historically, civil codes tended to include a provision related to the leasing of services, in which lifelong procurement is prohibited, some of which still exist (Article 1.780 French and Dominican Civil Code; Article 1.550 Haitian Civil Code; Article 1.754 Honduran Civil Code; Article 2.995 Nicaraguan Civil Code; Article 1.335 Panamanian Civil Code; Article 1.569 Saint Lucian Civil Code).

However, it is generally admitted that the parties enter into a contract in which no expiry date has been agreed, and this does not result from its nature or circumstances either, or in which it is expressly established that the contract will remain in effect for an indefinite period. The validity of these contracts is generally dependent, both in the civil law or continental as well as in the common law systems, on the parties being able to be released by unilateral will (with or without a period of notice). Thus, for example, the French Civil Code expressly establishes in its Article 1.780 that one person may engage his services only for a definite period; consequently, the leasing of services without any determination of duration will always be able to end through the will of any of the contracting parties. And we find a similar provision in Article 1.755 Honduran Civil Code.

This power of unilateral withdrawal from the contract is an exception to the principles of enforceability and irrevocability of contracts (Article 1.2 OHADAC Principles and its commentary), for contracts concluded for an indefinite period.

The legal systems of the OHADAC territory, without containing a general rule on the withdrawal from contracts outside the sphere of consumer law, if they govern this for certain contracts that are made to last, such as, for example, construction contracts (Article 1.794 French and Dominican Civil Codes; Article 2.011 Guatemalan Civil Code; Article 7:764 Dutch and Suriname Civil Codes; Article 1.346 Panamanian Civil Code; Article 1.639 Venezuelan Civil Code); the company (Article 1.246 Costa Rican Civil Code; Article 1.865 Dominican Civil Code; Articles 1.844.7º French Civil Code; Article 1.634 Haitian Civil Code; Article 1.879 Honduran Civil Code; Article 2.720 Mexican Civil Code; Article 3.285 Nicaraguan Civil Code; Article 1.391 Panamanian Civil Code; 1.591 Puerto Rican Civil Code; 1.673 Venezuelan Civil Code); agency contracts (Article 2.189 Colombian Civil Code; Article 1.278 Costa Rican Civil Code; Article 409 Cuban Civil Code; Article 2.003 French and Dominican Civil Codes; Article 1.717 Guatemalan Civil Code; Article 1.767 Haitian Civil Code; Article 1.911 Honduran Civil Code; Article 2.595 Mexican Civil Code; Article 3.345 Nicaraguan Civil Code; Article 1.423 Panamanian Civil Code; Article 1.623 Puerto Rican Civil Code; Article 1.655 Saint Lucian Civil Code; Article 1.704 Venezuelan Civil Code); the service contract in general (Article 7:408 Dutch and Suriname Civil Code); and commercial commissions or mandates (Article 1.279 Colombian Commercial Code; Article 197 Puerto Rican Commercial Code).

The codes of the Caribbean countries of the civil law or continental tradition also tend to provide that if no particular expiry date of a contract concluded for an indefinite period has been agreed, the parties may end it through a notice of termination, by giving a sufficient period of notice. Thus, they provide, for contracts for the lease of goods, Articles 1.151 Costa Rican Civil Code, 7:228.2º Dutch and Suriname Civil Code, 1.717 Honduran Civil Code, 2.478 Mexican Civil Code, 1.322 Panamanian Civil Code, 1.560 Saint Lucian Civil Code and Article 1.615 Venezuelan Civil Code; for commercial supply contracts, Articles 977 Colombian Commercial Code and 802 Honduran Commercial Code; for commercial hosting Articles 1.197.2º Colombian Commercial Code and 871 Guatemalan Commercial Code; and for agency contracts Article 7:437 Dutch and Suriname Civil Code.

In the same manner, Anglo-American law permits the release in contracts for an indefinite period (provision of consultancy, supply, licensing services ...), granting the parties the power to terminate the contract unilaterally, without the need to cite any reason and without the need to give a period of notice either if this has not been agreed [Baird Textile Holdings Ltd v Mark & Spencer (2001), EWCA Civ 274; Crediton Gas Co v Crediton Urban Council (1928), Ch. 147 44; Jani King (GB) Ltd v Pula Enterprises Ltd (2007), EWHC 2433 QB (2008); Servicepower Asia Pacific Pty Ltd v Service-power Business Solutions Ltd (2009) EWHC 179 (2010); sections 3:06 (5) and 3:10 Restatement (Third) of Agency; section 118 Restatement (Second) of Agency]. However, English case law has determined that unless the agreement contains a clause in which the parties are expressly granted the power of withdrawal, this will not in all cases be present in the contract as an implied term, unless the “presumption of perpetual duration” can be applied in the contracts in which there is no determination of the contract's duration [Llanelly Ry & Dock Co v L & NW Ry (1875), LR 7 HL 550].

Articles 5.1.8 UP, 6:109 PECL and III-1:109 (2) DCFR provide for the power of withdrawal in contracts concluded for an indefinite period, always with the obligation to give a reasonable period of notice.

Accordingly, the notice of termination or withdrawal is regulated as the most usual form of termination of contracts for an indefinite period, without the need to cite any reason and give a reasonable period of notice, for the purpose of avoiding the disadvantages resulting from the exercise of the power, in paragraph 1 of the proposed rule in these OHADAC Principles. The withdrawal by giving a reasonable period of notice aims to balance the interests of both contracting parties: the interest of the party that wishes to be released from the contract as well as that of the contracting party that prefers its continuation, due to having made investments with a view to its performance, which will only be profitable for it if the contract lasts for a determined period of time, or due to it being difficult for it to conclude a similar alternative contract with another party immediately.

The proposed rule aims to “fill a gap” in connection with the common law legal systems which, excluding agency contracts, do not contain a provision that imposes the period of notice, nor can they infer this as an implicit term of the contract [Baird Textile Holdings Ltd v Mark & Spencer (2001), EWCA Civ 274].

The reasonable nature of the period of notice will depend on numerous factors, including the nature and purpose of the contract, the time that it has lasted, the reasonable investments that have been made, the economic situation and any other circumstances existing at the time of the exercise of the withdrawal, etc. However, the variety of the situations that may exist make it advisable in some contracts for the parties to establish the period through a contractual clause, in order to avoid problems of interpretation.

Example 1: The financier A hires the legal services of the professional law firm B for an indefinite period. Either of the parties can withdraw unilaterally from the contract by giving notification to the other party a reasonable period beforehand.

The period of notice has a legal nature as an obligation, whose non-performance gives rise to compensation. In effect, as stated in paragraph 2 of the proposed rule, the party that withdraws from the contract in compliance with of the period of notice granted will only have to compensate the reasonable expenses that the other contracting party has incurred for the purpose of the performance of contract, and which they were not able to avoid despite the period of notice (normally due to being prior investments).

However, the party that does not comply with the period of notice disregards the interests of the counterparty, and is obliged to pay damages for non-performance of contract, in accordance with the provisions of Section 4 of Chapter 7 of these Principles.

Example 2: In the facts of example 1, if the constructor decides to terminate the contract with the professional law firm B, without communicating this to it by giving sufficient notice beforehand, it must pay damages not only for the reasonable investments that B has made with a view to the performance, but also for the resulting loss of profits, for example, resulting from the rejection of other clients, and other expenses resulting from the non-performance for which damages would be payable in accordance with these Principles.

Finally, unilateral withdrawal, as the ordinary manner of terminating a contract concluded for an indefinite period, should not be confused with the case of hardship provided in Article 6.3.1 of these Principles. In the case of hardship, unforeseen circumstances determine that the performance becomes excessively disproportionate for one of the parties, which will be able to terminate the contract without the need to observe a period of notice (or renegotiate this if this has been agreed). However, the rule of this provision does not require a change of circumstances, since this is a withdrawal ad nutum whose only requirements are the existence of a contract for an indefinite period and the observance of a period of notice.

CLAUSES ESTABLISHING A PERIOD OF NOTICE

As has been noted, sometimes it is appropriate to include in the contract a clause in which the parties determine the adequate period of notice, which prevents the contracting parties from compensating the damages related to the confidence in the performance of the contract.

Option A: Clause with a period of notice in contracts for a definite period

“The parties may terminate this contract, by unilaterally withdrawing from the same and without the need to invoke any reason, by giving a written period of notice with a duration of (...).”

Option B: Clause with a period of notice in contracts for an indefinite period

“At any time during the contract period, the parties are empowered to withdraw unilaterally from the same, without the need to invoke any reason, by giving a written period of notice equivalent to one month per year of the contract period, with a maximum period of six months.”