There is more risk in a long-term agreement than one might think

A long-term agreement often entails more legal risk than entrepreneurs realize. The greatest danger lies not in the collaboration itself, but in what is not in writing: how the contract ends, whether it applies for a fixed or indefinite period, and what happens in the event of tacit renewal or payment problems. Those who fail to establish these points in advance may find themselves bound by a long-term obligation that is difficult to terminate, or conversely, suddenly find themselves without a customer or supplier. Carefully considering the duration and termination prevents most conflicts.

What is a long-term agreement?

A long-term agreement is a contract that is not executed in a single transaction, but binds parties to each other over a longer period through recurring performances. Examples include a supply contract with a regular customer, a lease agreement, a maintenance contract, or an ongoing collaboration with a supplier. This contrasts with a one-off agreement, such as the purchase of computers or office furniture, which is concluded with delivery and payment.

As a retailer or SME owner, you likely have a folder full of contracts with energy suppliers, landlords, customers, and other partners. Some of these are short-term agreements, but it is precisely the long-term commitments that deserve extra attention. With a long-term agreement, it is important to put everything down on paper meticulously. Legal practice proves this time and again.

Caution: a long-term agreement can arise unnoticed

A common misconception is that a long-term agreement only exists when you consciously sign a contract for it. That is incorrect. Case law has repeatedly ruled that a long-term agreement can also arise tacitly, simply because parties conduct business with each other in a consistent manner for an extended period.

A well-known example is the dispute between bicycle manufacturer Batavus and Vriend's Tweewielercentrum. For years, Vriend's purchased bicycles from Batavus on the basis of individual orders. When Batavus sought to terminate the relationship, the court ruled that, due to this long-term, recurring commercial relationship, there was a continuous contract, with all the associated consequences for termination. Thus, a series of individual orders can legally develop into something with much more far-reaching obligations.

Do you deliberately enter into agreements only for individual orders? Then explicitly stipulate that successive orders do not automatically qualify as a continuous agreement. Such a clause is never completely watertight, but it significantly strengthens your position should a conflict arise.

Specify the type of long-term agreement involved

Is it indeed a long-term agreement? Then make it crystal clear whether it applies for a fixed or indefinite period . This distinction largely determines how and when the contract can be terminated. If nothing is agreed upon regarding this, there is a risk that the agreement will be interpreted as an obligation for an indefinite period.

Is it a fixed-term contract? Then specify the duration concretely and be specific about the end date.

Watch out for automatic renewal

Many long-term agreements continue tacitly after the agreed period. This is convenient, but it is not always clear how such tacit continuation should be interpreted. Is the contract then extended for a fixed term each time, or does it change into an agreement for an indefinite period? Avoid disputes by explicitly stipulating the term for which the agreement is extended in the event of tacit continuation and how it can be terminated in that case.

Think about the termination in advance

You enter into a long-term agreement in good faith. Nevertheless, all sorts of things can change during the long term, either for you or for the other party. That is precisely why it is wise to make proper arrangements for termination in advance.

Termination of a fixed term

In principle, a fixed-term contract runs until the end of the agreed period and cannot simply be terminated prematurely. Do you still want the option to part ways earlier? Then include an explicit termination clause. Ensure that early termination remains within reasonable limits and provide for a reasonable notice period and, where applicable, termination compensation.

Termination for an indefinite period

In principle, a long-term agreement for an indefinite period can also be terminated without a termination clause. Even then, a reasonable notice period must apply and, depending on the circumstances, possibly compensation. The requirements imposed in this regard depend heavily on the duration of the relationship, the investments made, and the degree of interdependence between the parties.

To avoid lengthy discussions, it is best to agree on the notice period and any compensation in advance. If the notice period or compensation is unreasonable, the termination may have no effect. In practice, a reasonable arrangement established in advance significantly strengthens your contractual position.

Take into account the opposing party's financial problems

In principle, a long-term agreement remains in effect even if the counterparty encounters financial difficulties. This can have unpleasant consequences, for example, when goods your supplier still has to deliver to you are seized. For this reason, it is often agreed that bankruptcy, suspension of payments, and seizure constitute grounds for terminating the agreement. If your counterparty fails to meet their payment obligations despite such an arrangement, it is advisable to hand over the claim to a professional debt collection agency.

Which risks do entrepreneurs often forget?

• No clear term: uncertainty regarding a fixed-term or indefinite term often leads to conflicts over termination.
• Forgotten termination clause: without clear agreements, you can get stuck or, conversely, suddenly find yourself without a customer or supplier.
• Unexpected tacit renewal: the contract continues longer than intended.
• No provision for price changes: rising purchasing or energy prices could make the cooperation unsustainable.
• No force majeure clause: think of strikes, supply problems, or other unforeseen circumstances.
• No exit in the event of bankruptcy or non-payment: you remain bound while the counterparty no longer delivers or pays.

Many of these points belong in the main agreement or in well-aligned general terms and conditions. Together, they form the legal safety net for a long-term collaboration.

Frequently asked questions about long-term agreements

Can I terminate a fixed-term contract prematurely?

In principle, no. A fixed-term contract runs until the end of the agreed period. Early termination is only possible if you have included this in the contract, or in exceptional circumstances. If you want to be flexible, include an early termination clause in advance.

What is a reasonable notice period for a long-term contract?

This cannot be captured in a fixed number of months. A reasonable notice period depends on the duration of the relationship, the investments made, and the degree of interdependence between the parties. The longer and more intensive the collaboration, the longer the term generally considered reasonable. If in doubt, have this assessed legally.

Can a long-term agreement arise tacitly?

Yes. If parties do business with each other on an established basis for an extended period, this can be legally regarded as a continuous agreement, even without a signed contract. The Batavus dispute demonstrates that a series of separate orders can develop into an agreement with far-reaching obligations.

What happens if my counterparty goes bankrupt?

In principle, the agreement remains in force unless you have agreed otherwise. Therefore, it is advisable to include in the contract that bankruptcy, suspension of payments, or attachment constitute grounds for terminating the agreement.

Do I have to pay a cancellation fee upon termination?

That depends on the agreements and the circumstances. Upon termination of a long-term agreement, compensation may be applicable depending on the situation, especially if the other party has made substantial investments. An arrangement established in advance prevents disputes afterwards.

Drafting a long-term agreement is specialist work

Some of the most important pitfalls of long-term agreements were discussed above: the classification of the contract and termination. However, much more can come into play, ranging from changing prices and force majeure to liability and a potential non-compete clause. Those who give this careful consideration in advance can prevent costly conflicts further down the line.

At MKB Juristen, we have seen it all within contract law . Thanks to our years of experience, we can proactively anticipate situations that may arise during the term of a contract, ensuring that your agreement actually protects you. Are you unsure about an existing contract, or do you want to properly formalize a new collaboration? Then feel free to contact us without obligation via our legal assistance.

Immediate legal advice regarding your long-term agreement

Do you want certainty regarding the duration, termination options, and risks of your long-term agreement? Our legal experts are happy to advise you and ensure a contract that suits your business. Schedule a no-obligation intake and discuss your situation with a specialist.