Rory Spillman and Simon Fitzpatrick discuss the case of Zaha Hadid Ltd v The Zaha Hadid Foundation [2026] EWCA Civ 192, in New Law Journal

Background

The case involved a trademark licence that was originally given by Dame Zaha Hadid to her architecture firm, Zaha Hadid Limited (the 'Company'). Upon her death in 2016, the trademark was bequeathed to the Zaha Hadid Foundation (the 'Foundation') which became party to the licence agreement. In wishing to renegotiate the terms of the licence agreement, the Company contended that despite there being no express right of termination on the part of the Company, the agreement could be terminated upon reasonable notice as a matter of construction.

The key term in respect of termination under the licence agreement provided as follows: 'This agreement shall commence on the Effective Date and shall continue indefinitely, unless terminated earlier in accordance with this clause' (emphasis added). The remaining subclauses provided express termination rights to the Foundation, but none to the Company.

Key principles

The key principles of contractual construction were summarised in 2023 in Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2023] 2 All ER 1063: contractual construction must be undertaken objectively to the standard of a reasonable person with all of the background knowledge reasonably available to the parties. Construction involves construing the contract as a whole and giving appropriate weight to the wider context depending on the quality of the drafting.

The process of interpreting the contract is often called a unitary exercise, where the proposed interpretations are checked against the contract and the various implications are investigated. Further, as noted in Wood v Capita [2017] 4 All ER 615, '[the Court] must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest'.

Alongside the general principles, a specific line of authority relating to contracts of indefinite duration has also developed. Here, the 1947 House of Lords case of Winter Garden Theatre (London) Limited v Millenium Productions Ltd [1947] 2 All ER 331 established a two-stage test when determining whether a right to terminate on reasonable notice should be construed within the relevant contract.

• The first stage is to construe the contract in order to determine the common intention of the parties as regards the duration of the contract.

• The second stage is to construe the contract in order to give effect to the common intention determined in the first stage. In that context, a question may arise as to what term should be implied to give effect to the intention of the parties.

Should a question of implication arise, it is important to bear in mind the 'stringent test' as posited in the 2000 case of Equitable Life Assurance Society v Hyman [2000] 3 All ER 961 regarding implying terms into a contract. In Marks & Spencer plc v BNP Paribas Securities Trust Co (Jersey) Ltd [2016] 4 All ER 441, which considered the 'stringent test', a term may be implied if a reasonable reader would find that the term is either so obvious as to go without saying, or necessary for business efficacy. The Supreme Court also confirmed in the same judgment that the implication test is distinct from the contractual construction test, notwithstanding that both share similar features, such as the reasonable reader, commercial common sense and the text of the contract.

High Court decision

Before the High Court, the Company based its arguments on contractual construction alone, placing emphasis on the first part of the clause referenced above and the use of the express term 'indefinitely'. As part of those arguments, the Company posited that a conventional construction of the terms should lead to one that would allow for either party to terminate the licence upon reasonable notice. The Company made clear that it was not pursuing its arguments on the basis of the 'stringent test' associated with an implied term. The High Court rejected the Company's construction and ultimately construed the licence as continuing in perpetuity unless the Foundation elected to terminate the licence under one of its granted powers under clause 12.2 of the licence.

Grounds of Appeal

On appeal, the Company advanced three grounds related to issues of construction.

• The first ground was that the Judge erred in his construction of the termination clause in failing to consider the provisions of the contract as a whole and the commercial implications of his construction, namely that it would be inconsistent with commercial common sense if the Company were to be bound to the licence forever.

• The second ground was that the Company's advanced construction was not inconsistent with the express terms of the licence.

• The third ground related to the Judge's treatment of the authorities relating to contracts of no fixed term with no express termination right and in which termination rights on reasonable notice had been implied, in that the Judge treated them as cases of implied terms rather than as cases of construction.

During oral submissions before the Court of Appeal, and upon invitation from the Court, the Company maintained that its primary arguments were that of construction, but if the Court considered that the construction in substance involved a case of an implied term, then the Company also maintained that argument.

Court of Appeal decision

The Court of Appeal confirmed the two-stage test from Winter Garden Theatre. The first part of the test was to consider whether the agreement was to be in perpetuity and if it was not, then the intention must have been for the licence to be of an indefinite duration. If the agreement was intended to be perpetual, then no right to termination could follow. However, the opposite would be true if the contract was of an indefinite duration. In other words, as a matter of both principle and logic, it necessarily follows from a conclusion that the true construction of the parties' intentions is that if an agreement is to be of indefinite duration that a power to terminate on reasonable notice forms part of those intentions.

Thus, the Court of Appeal unanimously allowed the appeal. In construing the licence, the Court relied upon several factors in finding that the licence was not a perpetual agreement. This included the wider context surrounding the agreement and that, in that context, perpetuity did not accord with the wider business common sense.

The Court highlighted that, under the licence agreement, the Company was required to promote the use of the trademark, which may not have always been feasible given a change in circumstances - such as changes in taste, style or technology over time. The Court also stressed that, although it was not determinative on its face, there was an intentional choice in using the term 'indefinitely'. It did not lend support to a construction in favour of perpetuity.

The Court concluded that a right to terminate on reasonable notice would not be inconsistent with the other terms of the licence. Whilst the Foundation had express contractual rights to terminate earlier, that was not inconsistent with there being a general right to terminate upon reasonable notice. In considering the Foundation's argument in response under the maxim that if certain categories of terms are expressly mentioned within a contract, it is often inferred that those within the same category that are not expressly mentioned have been deliberately omitted, the Court of Appeal confirmed that the maxim should be considered as part of the unitary exercise, but is not a determinative factor for the purposes of contractual interpretation.

Accordingly, the Court of Appeal held that the contract was indefinite in nature and not perpetual and that termination upon reasonable notice should be inferred. It made clear that this decision was based solely on the principles of contractual interpretation, in that once the meaning of 'indefinitely' was properly understood, the termination rights flowed directly from that understanding. On that view, there was therefore no need to imply a term into the contract.

At first glance, the Court of Appeal's judgment may seem surprising in light of the case law on implied terms referenced above. However, the Court's decision follows a very narrow line of authority that derives from Winter Garden Theatre in respect of contracts of indefinite duration that remains good law. Nevertheless, the interplay between the tools of contractual construction and the law of implied terms is interesting.

As can be seen from the comments of both the Court of Appeal and the Company's submissions, the test in these circumstances is solely based on contractual interpretation, but the end result does very much appear as if a term has been implied into the contract for business efficacy. The Court of Appeal was clear that its conclusion was based on the consequences of its interpretation of the relevant contract. However, the Court does appear to have left open the question of whether termination upon reasonable notice could also be implied into the contract. In April 2026, the Foundation sought permission to appeal to the Supreme Court, which was refused in early July. Further guidance on the interplay between interpretation and implication will therefore have to wait for another day."

Conclusion

On one view, in finding a termination provision within a contact which does not expressly exist (despite other termination provisions expressly existing), the Court of Appeal appears to have sought to stretch the principles of contractual construction and, in doing so, blur the lines between those principles and the law of implied terms.

However, on another view, the Court of Appeal has simply applied key, well-established principles of contractual construction as they arise in contracts of indefinite duration with emphasis on the commercial context and background of the contract. In concluding that, when properly construed, the contract was indefinite rather than perpetual, the Court has sought to give effect to the indefinite nature of the contract.

This case is a stark reminder to parties and legal practitioners to ensure that, wherever possible, clear and concise terms are used in order to convey the true meaning of the contract and the parties' intentions, particularly with respect to the contract's duration and termination rights.

If the contractual wording is clear on its face, then the contractual interpretation exercise will not be as intensive, nor will it likely lead to an unanticipated result. In terms of duration, what this case shows is that the parties' intention must be clearly contemplated and understood at the drafting stage. If the intention is to bind the parties in perpetuity, then perpetual language should be used.

In the absence of such language, then it seems probable that the Court will be reluctant to hold that there was an intention to be bound in perpetuity. In the Court of Appeal's Judgment, there are several factual indicators that were relied upon, but the most general proposition is that commercial common sense indicates that there is usually not an intention to be bound forever. Clear contractual language can, of course, overcome this.