Cutting the cord, keeping it fair: the Dutch Supreme Court recalibrates termination of duration agreements

• What is a duration agreement? A duration agreement is a legal relationship with continuous or recurrent performance over time. Dutch law recognises both named contracts with statutory regimes and unnamed commercial collaborations governed by general contract law (e.g., distribution).
• Fixed term versus indefinite term. For fixed‑term agreements, mid‑term termination for convenience is, in principle, unavailable unless the contract or statute provides for it; deviation may be sought only via unforeseen circumstances. For agreements of indefinite duration, termination is theoretically possible, even if the contract and the law are silent, but open norms may attach conditions.
• When the contract is silent (indefinite term). If neither contract nor statute sets a regime, the supplementary effect of reasonableness and fairness can require: (a) a sufficiently weighty reason in exceptional settings; (b) a reasonable notice period; and/or (c) an offer of compensation. These elements are calibrated to dependency, duration, investments, and transition needs. In rare cases, parties may have intended true non‑terminability and any challenge to that will rest on considerations of reasonableness and fairness or unforeseen circumstances.
• When a termination clause exists. Where a contract contains an express termination mechanism, that mechanism governs. Courts may supplement only where there is a genuine gap (for example, implying an obligation to offer compensation), but may not rewrite clear terms – such as an agreed notice period – via supplementation. Setting aside a clear clause requires the higher threshold of reasonableness, fairness or unforeseen circumstances to be met.
• Compensation versus damages. If the termination is valid, but fairness requires monetary mitigation, compensation is not simply lost profits as calculated by reference to the counterfactual. It targets transition costs, unrecouped investments tied to the relationship, and other justified outlays beyond ordinary entrepreneurial risk that the afforded notice did not absorb. By contrast, if a termination clause or its use is set aside and the termination therefore lacks legal effect, exposure can approach the positive contractual interest as in wrongful termination.
• Proof and allocation of burdens. The terminating party needs only to show termination in line with the contract or baseline principles. The party resisting termination or seeking compensation must plead and prove the specific circumstances calling for conditions (reason, time, money) and quantify any compensation sought. A voluntarily granted longer notice period can be relevant to quantum, but will not be decisive.
• Regulatory overlays and consumer carve‑outs. Mandatory statutory regimes (e.g., agency, franchise) may impose their own rules, and consumer protection introduces additional constraints. The present discussion focuses on business‑to‑business settings.
• Reasonableness and fairness (art. 6:248 DCC). Dutch law channels equity through two effects. The supplementary effect in paragraph (1) fills gaps and may imply ancillary duties (reasonable notice, weighty reason in exceptional dependency settings, suitable compensation) but does not override clear terms. The limiting effect in paragraph (2) is a safety valve: a clear term—or its invocation—may be disapplied if its operation would be unacceptable. This is exceptional and fact‑sensitive. If the valve is opened and a clause falls away, supplementation then fills the resulting gap in a second step.

At headline level, little has changed: Dutch law still privileges pacta sunt servanda (“agreements must be held”) in commercial relationships. Where a duration agreement contains a termination clause, termination in accordance with that clause is in principle valid. The refinements concern how and when open norms intervene, and with what consequences.

The Retailer case resolved a recurring issue: if circumstances require that termination for convenience be accompanied by “suitable” compensation, the absence of such an offer does not as a rule invalidate the termination. The termination stands if contractual and statutory conditions are met. Two caveats follow. First, the supplementary effect can oblige the terminating party to pay compensation after the fact. Second, in exceptional cases, the absence of a suitable offer for compensation – together with other factors – may render the termination itself unacceptable, with loss of legal effect and wrongful‑termination exposure.

The Logistics case then tightened the doctrinal screws. Faced with a one‑month contractual notice period, the Court of Appeal had used supplementation to “extend” the period. The Supreme Court rejected that route: a court cannot neutralise or rewrite a clear contractual term via supplementation. If a clause is to be set aside, the portal is the limiting effect (or unforeseen circumstances), a higher threshold. Supplementation can still support an obligation to pay compensation; and a party’s decision to grant a longer notice period in practice may inform the amount of any compensation. The line is redrawn: agreed notice periods stand; fairness speaks mainly through money, not judicially re‑engineered time.

The framework calibrates three interdependent variables: the reason to terminate, the notice afforded, and whether (and to what extent) compensation is owed. A strong justification for exit tolerates more abrupt timelines; a short notice period (especially amid dependency) more readily pulls compensation into view; a generous notice period can mitigate the need or quantum of compensation. The decisive inquiry is whether the terminated party had a fair runway to adapt and manage sunk or transitional costs beyond ordinary entrepreneurial risk.

Two clarifications matter:

• Compensation is not always a proxy for the positive contractual interest. The measure is what fairness demands.
• A longer‑than‑contractual notice granted in practice can influence, but does not dictate, compensation. It is one factor in a holistic assessment.

The decisions refine the roles of supplementation and limitation.

• Supplementation (art. 6:248(1) DCC) fills gaps; it does not rewrite clear terms. In termination contexts, it can impose ancillary conditions – most notably an obligation to offer compensation – where the contract is silent on that point, and can inform the amount.
• Limitation (art. 6:248(2) DCC) is a sparingly used safety valve for clear terms that would operate unacceptably. Where successful, the contractual provision is set aside; a gap then appears and, in that second step, supplementation can shape the replacement regime. Because setting aside a clause raises the spectre of wrongful termination if termination nevertheless proceeded, damages exposure can escalate toward the positive contractual interest. The threshold is high and the evidential burden on the contesting party is real.

This insistence on procedural channels disciplines judicial reasoning and curbs a drift toward general proportionality review that dilutes contractual certainty. Courts will not casually extend bargained‑for notice periods; they will, however, attach monetary conditions where fairness requires.

For drafters, the guidance is both sobering and enabling. Vague termination language invites applications for supplementation and disputes about compensation. If predictability is the aim, draft it.

• First, calibrate termination beyond bare power and period. Specify whether reasons are required and of what weight. Clarify whether any compensation is payable on termination and, if so, constrain it through a method or cap tailored to the relationship. Provisions aimed at this do not foreclose fairness review, but they constrain supplementation and raise the threshold for deviation.
• Second, align time and money ex ante. If the commercial logic is that longer notice substitutes for compensation, say so and define what “longer” means. Conversely, if agility and short notice are desired, consider this in the drafting.
• Third, maintain discipline as relationships evolve. Where collaborations scale beyond the original design, revisit termination architecture. The Logistics case arose from a court’s impulse to keep a clause “fit for purpose” via supplementation. The Supreme Court’s response makes contract maintenance a necessity: adjust the clause by agreement; do not expect a court to do it later via supplementation.
• Fourth, plan litigation posture. A terminating party should have a litigation plan in place with adequate risk mitigation measures. The terminated party bears the burden to show dependency, investments, adaptation timelines, and why such costs exceed ordinary business risk. The terminating side can define the record by granting pragmatic notice and setting out a reasoned position on compensation’s inapplicability or modest scope. Attempts to invalidate termination via limitation require a compelling, well‑evidenced narrative of unacceptability, with acceptance of the attendant risk profile if that threshold is crossed.

The move from time to money leaves two uncertainties. First, what counts as “suitable” compensation will remain context‑specific. The taxonomy – dependency, duration, unrecouped investments, adaptation costs – is clearer, but its weighting varies by sector and may be influenced by regulatory overlays. Second, the effect of a voluntarily extended notice on compensation is not formulaic and parties should expect argument on diminishing marginal relief.

These uncertainties do not unsettle the fundamental principles: courts will not lengthen an agreed notice period through supplementation; fairness operates mainly through compensation; and setting aside a clause remains exceptional.

The Retailer case and the Logistics case do not upend Dutch termination law; they refine it in a commercially intelligible direction. The economics of exit are managed through calibrated time and money rather than judicial redrafting. The task for the drafter is plain: put the exit architecture in the contract, including financial guardrails; keep it under review; and, when the time comes to part, manage the landing (by time, by money, or a prudent mix), so that cutting the cord remains firm and fair.