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Contracts generally have terminations clauses allowing either party to eventually end the obligation imposed on them by a contract. E.g. the buyer may have to notify the seller of termination in writing; the service may, at its sole discretion, terminate a user for breaking the rules; the agreement may terminate on a specific date and so on. In principle, a contract could be written in such a way that the service has the right to terminate the agreement, but the customer cannot terminate the agreement (so they are stuck with that cell service provider for life). Assume that the contracts in question are contracts of adhesion (take it or leave it, customer). In the scenario, (1) there may be an explicit statement that the customer is perpetually bound or (2) there is no statement regarding termination by the customer: I assume the answer is different depending on whether the contract is silent.

Is there any statutory or case law that addresses the enforceability of perpetual contracts (general common law, unless the answer is too jurisdiction in which case US)? I understand that a contract can obligate a customer to do something in exchange for receiving X, so I'm not asking if quid can be extinguished when there exists a viable quo within the statute if limits. I am also not asking about perpetual copyright licenses.

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  • The rule against perpetuities, despite its name, doesn't seem to apply to the sort of contract you have in mind.
    – Nate Eldredge
    Commented Sep 2, 2019 at 17:29
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    Would you consider an NDA that imposes lifetime obligations not to disclose a secret to be a “perpetual contract?” Those are pretty common when dealing with trade secrets.
    – cpast
    Commented Sep 2, 2019 at 21:35
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    You might want to say whether you count contracts that have an ending provision but that might be far in the future, eg @cpast is right about lifetime trade secret agreements . It is routine to have data processing agreements last "as long as the data is processed" which can be a long time. There are also perfectly valid contracts that last long fixed periods - eg 500+ years - which might as well be perpetual.
    – Francis Davey
    Commented Apr 24 at 0:02

2 Answers 2

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Yes

There is no general legal prohibition on perpetual contracts.

What you describe is not a perpetual contract

A perpetual contract is one where at least one parties obligations are indefinitely ongoing and there is no mechanism in the contract (outside breach or repudiation) for terminating it. The contract you describe has a mechanism for termination albeit only available to one party.

Perpetual contracts can be entered into knowingly and willingly - most perpetuities, where a person leaves the income on an investment to a university or charity forever subject to conditions, are of this type. Or they can be entered into accidentally, for example, a fixed term contract with an automatic renewal where the renewal term is not specified is a perpetual contract.

The important point is there must be no explicit mechanism in the contract for bringing the contract to an end for it to be a perpetual contract. In commercial arrangements, courts may imply a term that the parties can terminate on reasonable notice but this is subject to all the normal limitations.

Your example

As described, because there is an explicit term allowing termination, this is not a perpetual contract.

Such a contract would be subject to the normal common law doctrine of unconscionably (which it almost certainly is) and, in some jurisdictions, consumer protection laws against unfair contract terms.

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  • "fixed term contract with an automatic renewal where the renewal term is not specified is a perpetual contract" said who? A reasonable person would expect the renewal term to be equal to the original one.
    – Greendrake
    Commented Sep 3, 2019 at 5:08
  • @Greendrake possibly they would - but contract interpretation is not about what people should have written, its about what they actually wrote. Assuming both parties agree that that is the interpretation, that's fine - but courts don't get involved when people agree.
    – Dale M ♦
    Commented Sep 3, 2019 at 5:15
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As you're wondering about jurisdictions: In the EU, consumer law specifically bans one-sided perpetual contracts. Any indefinite contract can be cancelled after one year.

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  • Do you have a number for that law?
    – user6726
    Commented Sep 3, 2019 at 15:13
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    @user6726: Unfair Contract Terms Directive (93/13/EEC)
    – MSalters
    Commented Sep 3, 2019 at 16:22
  • I don't see any such provision in eur-lex.europa.eu/legal-content/EN/TXT/… (the current version of that directive)
    – Francis Davey
    Commented Apr 22 at 7:15
  • @FrancisDavey: I believe "one-sided perpetual" would fall afoul of "authorizing the seller or supplier to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer"
    – Ben Voigt
    Commented Apr 23 at 18:51
  • @BenVoigt - generally speaking, yes. But note that list is indicative, so it would be inaccurate to say that it "bans one-sided contracts". But what I was querying was the claim that (i) any indefinite contract (even if not one-sided) (ii) can be cancelled after one year. There's nothing in the directive to that effect at all.
    – Francis Davey
    Commented Apr 23 at 23:59

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