# Indefinite-term contract

Source: https://contracko.com/glossary/indefinite-term-contract

# Indefinite-term contract

A contract with no fixed end date, continuing until validly terminated by a party.

## 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.

### How Contracko helps

Contracko flags indefinite-term contracts in the repository and schedules periodic review reminders, preventing them from becoming forgotten liabilities. The reporting dashboard surfaces all active indefinite-term contracts by category and value, so the annual review is a structured exercise rather than an ad-hoc search.

## Legal references

- [BW 6:248 Dutch Civil Code: reasonableness and fairness Dutch law](https://wetten.overheid.nl/BWBR0005289)

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.

## Relevant for

[IT Services](https://contracko.com/industries/it-services)[Logistics & Distribution](https://contracko.com/industries/logistics)[Manufacturing](https://contracko.com/industries/manufacturing)[Consulting](https://contracko.com/industries/consulting)

## Related clauses

- [Renewal and Notice Period Clause](https://contracko.com/clause-library/renewal-and-notice)
- [Termination for Convenience Clause](https://contracko.com/clause-library/termination-for-convenience)
- [Minimum Contract Duration](https://contracko.com/clause-library/minimum-contract-duration)

## Related terms

- [Term (duration)](https://contracko.com/glossary/term)
- [Notice period](https://contracko.com/glossary/notice-period)
- [Termination](https://contracko.com/glossary/termination)
- [Auto-renewal](https://contracko.com/glossary/auto-renewal)

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## Frequently asked questions

Common questions about this term.

- **Q:** Can an indefinite-term contract ever be terminated immediately?
  **A:** Yes, if there is a serious breach that justifies immediate termination (ontbinding wegens wanprestatie) or if the contract expressly allows termination for cause without notice. Termination for convenience always requires the agreed or a reasonable notice period.

- **Q:** How does Dutch law determine a reasonable notice period if the contract is silent?
  **A:** Courts consider the duration of the relationship, the degree of dependency of each party, the investments made in reliance on continuity, and industry norms. A long-standing exclusive distribution relationship may require a year or more; a shorter arrangement may require only weeks.

- **Q:** Is compensation always required when terminating an indefinite-term contract?
  **A:** Not always. Compensation is required when the terminating party's conduct is contrary to good faith, for instance if the other party has made substantial investments in reliance on continuity and the notice is disproportionately short.

- **Q:** Can a fixed-term contract become an indefinite-term contract automatically?
  **A:** Yes. If a fixed-term contract expires and both parties continue to perform without signing a new agreement or exercising a renewal option, Dutch courts typically treat the arrangement as continuing for an indefinite term on the same terms.

- **Q:** Does the duty of good faith affect how an indefinite-term contract can be terminated?
  **A:** Yes. Even if the contract gives one party a wide right of termination, BW 6:248 requires that right to be exercised in good faith. Terminating at an inconvenient time, without adequate warning, or after inducing the other party to rely on continuity can be found contrary to good faith.

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