In Zaha Hadid Ltd v The Zaha Hadid Foundation, the High Court ruled that indefinite agreements do not inherently include bilateral termination rights and that the absence of such rights does not constitute a restraint of trade. This decision emphasises the importance of explicit contractual terms and provides clarity on the interpretation of indefinite agreements.

Background

The dispute arose from a trademark licence agreement signed in 2013 between Dame Zaha Hadid and Zaha Hadid Limited, allowing the company to use the 'Zaha Hadid' marks in exchange for a royalty payment. Following Dame Zaha's death in 2016, the Zaha Hadid Foundation inherited the licensor's rights. The agreement was indefinite, with termination rights solely in favour of the Foundation. Zaha Hadid Limited sought to terminate the agreement, arguing for an implied right to terminate on reasonable notice and claiming the agreement was in restraint of trade.

Decision of the Court

The High Court rejected the company's arguments. The court held that the licence agreement did not confer bilateral termination rights. The court emphasised that the agreement's explicit terms were clear and unambiguous, and it was not the court's role to imply terms that the parties did not expressly include.

The court also dismissed the restraint of trade argument, noting that the agreement's commercial context and the company's continued success under the terms of the licence did not support the claim. The court found that the company's complaints were essentially seeking to renegotiate the unfair terms agreed to by the parties, rather than any legally relevant restraint.

Our thoughts

This case highlights several reminders for businesses when entering into long-term or indefinite agreements:

• Clarity in contractual terms: Ensure that all essential terms, including termination rights, are explicitly stated in the contract. 
• Commercial context: Understand that courts will consider the broader commercial context when interpreting agreements. A successful business operating under the terms of an agreement is less likely to persuade a court that the terms are unduly onerous or constitute a restraint of trade.
• Restraint of trade doctrine: The doctrine of restraint of trade is not a tool for renegotiating unfavourable terms after the fact. It is intended to address genuinely unreasonable restrictions on a party's ability to trade.