Terminating a continuing contract: rights, notice period and compensation

Has your business partner suddenly terminated a continuing contract? Or are you considering terminating a continuing contract yourself, but are unsure whether you may simply do so? The termination of continuing contracts is one of the most common sources of dispute in commercial contract law. In this blog, I explain what a continuing contract is, the different types that are distinguished, the conditions under which termination is permitted, what constitutes a reasonable notice period, and when a right to compensation arises. I also discuss the most recent case law of the Supreme Court (Hoge Raad) and the lower courts.

What is a continuing contract?
A continuing contract is an agreement in which the obligations are not performed on a one-off basis, but continue for a fixed or indefinite period or recur on an ongoing basis. Well-known examples include:

• Distribution and agency agreements;
• Franchise agreements;
• Cooperation agreements;
• Contracts for services and service-provider agreements;
• Supply agreements.

The law contains no general statutory rules governing the termination of continuing contracts. The court has considerable latitude in assessing whether a termination is lawful.

Named and unnamed continuing contracts
Not all continuing contracts are legally equivalent. An important distinction (with consequences for the options for termination) is that between named and unnamed continuing contracts.

Named continuing contracts
Named continuing contracts are agreements for which the law contains specific statutory rules. The legislature has, to a greater or lesser extent, laid down the rights and obligations of the parties (including the options for termination). Examples include:

• Agency agreement (Art. 7:428 et seq. of the Dutch Civil Code): the law prescribes mandatory minimum notice periods and, in principle, entitles the agent to a client indemnity (klantenvergoeding) upon termination (Art. 7:442 of the Dutch Civil Code). This protection cannot be excluded by contract.
• Contract for services (Art. 7:400 et seq. of the Dutch Civil Code): the principal may terminate the contract at any time pursuant to Art. 7:408 of the Dutch Civil Code; the contractor has more limited powers.
• Tenancy agreement (Art. 7:201 et seq. of the Dutch Civil Code): detailed statutory protection, particularly for tenants of residential and commercial premises.
• Franchise agreement (Art. 7:911 et seq. of the Dutch Civil Code): since the Franchise Act (Wet Franchise) entered into force in 2021, the franchise agreement has also become a named contract, with additional protective provisions for the franchisee.

For named continuing contracts, the mandatory statutory provisions constitute a minimum standard: contractual terms that are less favourable to the protected party than the law prescribes are void or voidable. In any given case, it is important to assess whether the applicable statutory rules are of a supplementary (default) or mandatory nature.

Unnamed continuing contracts
Unnamed continuing contracts are agreements for which the law contains no specific statutory rules. The parties must rely on their own contractual arrangements and (in the absence of, or in addition to, such arrangements) on the general rules of the law of obligations and the requirements of reasonableness and fairness (redelijkheid en billijkheid, Art. 6:248 of the Dutch Civil Code). Well-known examples are the distribution agreement and the (commercial) cooperation agreement.

For unnamed continuing contracts, no statutory safety net exists. It is precisely for this category that the Supreme Court has developed guidelines through its case law (including the judgments that are the focus of this blog).

Practical significance of the distinction
On every termination, the first step is to determine which type of contract is involved. For a named contract: always check whether the law contains mandatory protective provisions that cannot be circumvented by contract. For an unnamed contract: where there is no contractual termination arrangement, the case law on reasonableness and fairness (discussed below) provides the principal guidelines.

The main rule: an indefinite-term contract is, in principle, terminable
A continuing contract entered into for an indefinite term is, in principle, always terminable, unless the law or the agreement provides otherwise. This follows from settled case law of the Supreme Court, with the De Ronde Venen/Stedin judgment (Supreme Court 28 October 2011, ECLI:NL:HR:2011:BQ9854) as the anchor point.

This does not mean, however, that termination is always without consequences. The requirements of reasonableness and fairness (Art. 6:248 of the Dutch Civil Code) may entail that:

1. a reasonable notice period must be observed;
2. the termination must be accompanied by a ground for termination;
3. notwithstanding a correct notice period, a right to additional compensation may nonetheless exist.

For a fixed-term continuing contract, the opposite main rule applies: in principle, it cannot be terminated prematurely, unless this has been agreed by contract or the law provides otherwise (as in the case of the contract for services under Art. 7:408 of the Dutch Civil Code).

When is a ground for termination required?
Whether a ground for termination is required depends on the nature and content of the contract and the circumstances of the case. Relevant factors include:

• Duration of the cooperation – the longer the relationship, the more stringent the requirements;
• Dependence – is one party largely dependent on the other?
• Investments – has a party made specific investments in reliance on continuation?
• Exclusivity – does an exclusivity relationship apply?

In the Auping/Beverslaap judgment (Supreme Court 14 June 2013, ECLI:NL:HR:2013:BZ4163), the Supreme Court emphasised that the dependence of the terminated party and the duration of the cooperation (8.5 years in that case) are weighty factors in assessing whether the termination must meet additional requirements.

Recent case law: Supreme Court 29 November 2024 (Leen Bakker judgment)

A landmark ruling of the Supreme Court in this field is the judgment of 29 November 2024 in the Leen Bakker case (ECLI:NL:HR:2024:1709).

In this case, Leen Bakker had terminated a franchise agreement (on the basis of a contractual clause permitting termination where it could not reasonably be required of it to allow the agreement to continue) without making any offer of compensation. The Supreme Court confirmed the following principles:

• Termination on the basis of a contractual clause is, in principle, valid. A continuing contract that provides for a termination arrangement is, in principle, terminable on the basis of that arrangement. However, the requirements of reasonableness and fairness may entail that further requirements be imposed, including a compelling ground, a particular notice period or an offer of compensation.
• The absence of an offer of compensation does not render the termination invalid. The Supreme Court clarified that, as a rule, the absence of an offer of compensation does not render the termination invalid. Such absence may, however, be taken into account when determining the amount of compensation that is nonetheless payable.
• Exception: unacceptability by the standards of reasonableness and fairness. Termination without an offer of compensation may indeed be invalid where it is unacceptable by the standards of reasonableness and fairness. In the Leen Bakker case, the Court of Appeal held (and the Supreme Court confirmed) that, in view of the long-standing relationship, the investments made, the dependent position of the franchisee and the absence of any fault on its part, termination without an offer of compensation was unacceptable. Leen Bakker was therefore liable to pay compensation, the amount of which was to be determined in separate damages-assessment proceedings (schadestaatprocedure).

This judgment is of great practical significance: it clarifies the distinction between an invalid termination on the one hand and a valid but compensation-generating termination on the other. In practice, this means that a terminating party cannot simply rely on compliance with the contractual notice period being sufficient.

What constitutes a reasonable notice period?
The question of what constitutes a reasonable notice period regularly gives rise to disputes. The longer the contract has lasted and the greater the dependence, the longer the notice period that must be observed.

In its judgment of 16 September 2025 (ECLI:NL:GHSHE:2025:2541), the Court of Appeal of ’s-Hertogenbosch formulated a guideline for the notice period in continuing contracts:

Although this guideline is contract-specific, it reflects the line taken in the broader case law. In individual cases, special circumstances may warrant departure from it.

Additional compensation: even where notice is correctly given?
A frequently asked question is: "If I have observed a reasonable notice period, am I then done?" The answer is: not always.

In Goglio/SMQ (Supreme Court 2 February 2018, ECLI:NL:HR:2018:141), the Supreme Court confirmed that, even where statute and contract provide for a termination arrangement, the requirements of reasonableness and fairness under Art. 6:248(1) of the Dutch Civil Code may entail that further requirements be imposed on the termination. These may include a lump-sum buy-out (afkoopsom), goodwill compensation or compensation for investments that have not been recouped.

The Leen Bakker judgment of 29 November 2024 confirmed and further developed this: even where the termination is in itself legally valid, the fact that no compensation was offered may give rise to an obligation to pay damages. This is particularly the case where:

• the terminated party suffers loss that is not "covered" by the notice period;
• specific investments have been made that have not yet been recouped;
• the dependence is so great that the terminated party has no realistic possibility of obtaining alternative income in good time.

Termination of a contract for services
The contract for services warrants separate attention. Pursuant to Art. 7:408 of the Dutch Civil Code, the principal may terminate the contract at any time, even where it was entered into for a fixed term. The court will, however, critically assess whether, in the specific circumstances, the manner of termination is contrary to reasonableness and fairness.

In June 2025 (ECLI:NL:RBMNE:2025:3356), the Midden-Nederland District Court held that a contractual termination clause in a contract for services was not unreasonably onerous, not even by way of the reflexive effect (reflexwerking) of the black and grey lists, since the claimant was operating as a business and was not in a position comparable to that of a consumer.

Checklist: what to check when terminating a continuing contract

• Whether you are the terminating party or the terminated party, the following questions are always relevant:
• Has the contract been entered into for a fixed or an indefinite term?
• Is it a named or an unnamed continuing contract, and do any mandatory statutory protective provisions apply?
• Does the contract contain a termination clause and, if so, which grounds and notice periods apply?
• How long has the cooperation lasted?
• Is there dependence, exclusivity or have investments been made?
• Has a reasonable notice period been observed?
• Is there a proper ground for termination?
• Is there a right to additional compensation (even where the notice period was correct)?

What can you do?
The termination of a continuing contract directly affects your business interests. Whether you are confronted with an unexpected termination or wish to terminate a continuing contract yourself: timely legal advice is essential in order to determine your position and to limit or recover loss.

Rien Visscher is a lawyer (advocaat) at DVDW and specialises in commercial contract law and litigation. He regularly advises and litigates on the termination and ending of continuing contracts, including distribution, franchise, cooperation and services agreements. Rien Visscher litigates at all instances, including before the Supreme Court.

Do you have any questions arising from this blog, or would you like to discuss your situation? Please feel free to contact mr. Rien Visscher, without obligation (visscher@dvdw.nl or by telephone: 0655192638).

For earlier publications on this subject, see, among others:

• H. Visscher, "De redelijke opzegging van onbenoemde duurovereenkomsten" (The reasonable termination of unnamed continuing contracts), TvOB 2011/6
• H. Visscher, "De opzegging van onbenoemde duurovereenkomsten: een korte beschouwing" (The termination of unnamed continuing contracts: a brief consideration), V&O 2007, pp. 110–113

This blog is intended as general legal information. Its content is based on the state of the case law at the time of publication. For advice on your specific situation, please contact mr. Rien Visscher, partner at DVDW.