A court has offered advice on the grey area of what amounts to a ‘reasonable notice’ period where there is no written contract or a fixed-term contract has been informally extended.

In a recent case, Jackson Distribution Limited v Tum Yeto Inc, involving a distributor for a fashion and skate show brand, the high court held that reasonable notice for termination was nine months. The brand gave the distributor six months’ notice, and the distributor responded by claiming the agreement had been breached and gave the brand one month’s notice.

The judge reiterated existing law, setting out the factors that the court should take into account when reviewing such contract cases.

These are: the degree of formality involved; the length of the relationship and the extent of the early investment made by the claimant; the percentage of the claimant’s turnover that is made up by the defendant’s products; and how quickly the claimant would be able to replace the business lost.

According to law firm CMS Cameron McKenna, the judgment shows “the various factors a court will take into consideration when determining what a reasonable notice period is when there are no express terms agreed relating to termination”. The firm recommends that, wherever possible, parties should always operate under a formal written agreement to avoid the risk of becoming engaged in costly litigation as to what terms have been agreed.