Indefinite-term contract

Definition

An indefinite-term contract runs without a pre-agreed end date and continues until a party terminates it, typically by notice. Where the contract is silent on termination, Dutch case law allows termination on reasonable notice in good faith, and sometimes requires a sufficiently serious ground and even compensation, depending on the relationship's nature and duration. Clear notice and termination clauses reduce this uncertainty.

Example

A long-running distribution arrangement is for an indefinite term; the principal can only end it on a reasonable notice period given its many years' duration.

Why this is a business risk

An indefinite-term contract that the parties forget about creates ongoing obligations, costs and liabilities with no natural endpoint. If the relationship deteriorates, the absence of an agreed notice period means the court will set one, which can be longer than expected for a long-standing arrangement. Long-running service contracts for indefinite terms can also attract reclassification risk as employment relationships under Dutch law.

How to manage it

• Always include a termination clause with an explicit notice period, even if the parties expect the relationship to continue indefinitely.
• Conduct an annual review of all indefinite-term contracts to confirm they are still needed and on appropriate commercial terms.
• Assess whether a very long-running arrangement should be formalised as a fixed-term agreement with more structured terms, or whether an indefinite term with a realistic notice period remains the right structure.
• Document the commercial rationale for the relationship annually so the business impact of terminating can be assessed if a party later wants to exit.

Legal references

• BW 6:248 Dutch Civil Code: reasonableness and fairness Dutch law

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.