I signed a contract without an end date. How do I get out of it?

May 21, 2018
Print
PDF
The article was published in Afik News 257 23.05.2018

Long-term agreements generally do not include an expiration date and are sometimes not even based on a signed document that accurately defines the rights of the parties, including the right to terminate the contract. Is signing an agreement for a period that is not fixed in time binding forever?
Israeli Courts held that an agreement will never be for perpetuity, even if made without a time limitation, and it may be terminated by a prior notice – reasonable time that will enable the other party to get organized. How can such “reasonable time” be defined?
While each case will be reviewed under its circumstances, the rationale behind the length of the prior notice period is that a contract is intended to adapt itself to the environment and the time it was edited and be affected by changes caused by the passage of time. Human beings do not tend to bind themselves to agreements for ever and ever, especially considering the pace of trading, and therefore the trend is not to force a party to an agreement to carry it out against its will without any time limit. However, the party affected by the termination of the agreement must be allowed to finance the expenses incurred as a result of the agreement, as well as sufficient time for redeployment to the day after the end of the agreement without causing it to collapse.
A verdict given in early April, 2018, dealt with a hotel and a catering company that signed an agreement, according to which the catering company would provide catering services for the hotel guests. After about four years the catering company suddenly notified the hotel that within two days it will commence renovation of the dining room and thus would not be able to provide the services to the hotel. The Court held that this is not a reasonable time, especially in light of the length of the relationship, the trust between the parties and the dependency created, which together required a longer time for the hotel to get organized.
Another case that reached the Courts dealt with the temination of an agreement between a car importer and an agency that served for many years as a car dealership and as an authorized garage. The Court held that the appropriate notice period was one year, both in view of the long period of the agreement and in view of the time needed for the agency to reorganize following the termination of the agreement
In conclusion, there is no formula to answer the question of what will be deemed reasonable prior notice to terminate an agreement for a indefinite time. Each agreement is examined on its merits in accordance with the circumstances that led to its execution. Therefore, there is great importance in obtaining legal advice before entering into an agreement so that the agreement will duly reflect the intention of the parties even after years and even if a party will seek to be released from it. Early consultation with a professional who specializes in drafting agreements (and preferably in the specific area in which the agreement deals) may save future conflicts, great distress and funds.