Ending the relationship: reasonable notice of termination

The recent case of Anheuser-Busch International Inc & Anor v Commonwealth Brewery Ltd (The Bahamas) [2026] UKPC 8 discussed the purpose of notices of termination and how reasonable notice periods should be calculated in the absence of an express contractual term.

Facts of the Case

Anheuser-Busch International Inc (“ABI”) and Burns House Brewery (“BHL”) (BHL later merged with Commonwealth Brewery Ltd (“CBL”)) entered into an oral contract for the sale and distribution of beer in the Bahamas (“the Distribution Agreement”). The Distribution Agreement continued from 1975 until 2015, when ABI issued a termination letter to BHL. The letter stated that, as the Distribution Agreement had no express termination rights, ABI were entitled to terminate on reasonable notice which they deemed to be three months’ notice. BHL argued that a reasonable notice period would be three and a half years – approximately one month for each year of the agreement. ABI then extended the notice period to three and a half months.

Neither party disputes that the Distribution Agreement had an implied term to give reasonable notice of termination. The question throughout is whether the three and a half months’ notice period that ABI gave BHL was reasonable. The first instance judge concluded that 15 months would have been a reasonable period of notice. Overturning this, the Court of Appeal of the Bahamas held that the reasonable period of notice in this matter would range from three to six months. The three and a half months’ notice offered by ABI fell within that range and was therefore reasonable. BHL then appealed to the Privy Council, who clarified how the courts assess whether a period of notice for termination of a distribution agreement is reasonable.

The Privy Council’s Decision

The Privy Council considered previous English and Commonwealth case law relating to reasonable periods of notice. The Privy Council confirmed that the aim of a notice period is for the orderly winding up of the relationship and gives the receiving party an opportunity to make progress in adjusting to the upcoming termination. The emphasis is therefore not on ensuring that the notice period is lengthy enough to cover all loss of profit resulting from the termination.

The Privy Council then identified a non-exhaustive list of factors for consideration in determining what amounts to a reasonable notice period, including:

• The degree of formality of the parties’ relationship;
• Whether there is a significant dependence on the other party for revenue;
• The length of the parties’ relationship;
• The extent to which the receiving party has invested resources (financial, management or personnel) into the relationship; and
• Whether there is an obligation to continue performing during the notice period which points to a shorter notice period to allow the parties to move away from the commercial relationship.

The Privy Council dismissed the appeal, finding that the Court of Appeal was correct to set aside the first instance judgment on the basis that it gave weight to irrelevant considerations, such fixing the notice period at 15 months based on the period over which termination reduced BHL's profits. The first instance judge also failed to take into account the relevant considerations that the Distribution Agreement only accounted for 10 per cent of BHL’s turnover and that BHL was allowed to distribute competing products.

Key Takeaways

Businesses who are relying on commercial agreements without no specified fixed period of notice should note that they are relying on receiving a reasonable period of notice. That reasonable period of notice purports to cushion parties against a sudden change but does not protect the parties from all financial loss. As the Privy Council state in their judgment, “[t]hat is a risk of commercial life”.[1] Businesses with informal agreements who are concerned about the lack of certainty surrounding termination may wish to protect their interests by formalising the notice period.

For businesses seeking to terminate an informal contract on reasonable notice, it is important to ensure that there is a valid implied term to terminate and that the amount of notice is reasonable. Whilst this will be dependant on the facts of the relevant relationship, the non-exhaustive list in this judgment provides helpful guidance.

For more information, please contact a member of the Commercial team.

*This information is for guidance purposes only and does not constitute, nor should be regarded as, a substitute for taking legal advice that is tailored to your circumstances.

[1] Anheuser-Busch International Inc & Anor v Commonwealth Brewery Ltd (The Bahamas) [2026] UKPC 8, [69].