Are perpetual contracts enforceable?

Question

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.

Answer 1

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.

Answer 2

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.