Re-designing rights to terminate on reasonable notice

In Zaha Hadid Ltd v The Zaha Hadid Foundation, the High Court confirmed that agreements of indefinite duration would not necessarily be interpreted to include bilateral termination rights and that the absence of such rights did not mean the relevant agreements operated in restraint of trade. 

Disagreements between the architect’s foundation and her practice

In 2013, the architect Dame Zaha Hadid (now the Zaha Hadid Foundation) and Zaha Hadid Limited entered into a trademark licence agreement under which the company could use the “Zaha Hadid” marks in exchange for a royalty payment. 

After Dame Zaha’s death, the company wanted to terminate the licence agreement; however, subject to unilateral termination rights in favour of the foundation, the agreement was indefinite in duration. 

No bilateral termination rights in licence agreement

The company argued that the licence agreement should be read to include bilateral termination rights on reasonable notice. The company said that these rights existed in addition to the foundation’s express termination rights set out in the agreement.

Having established that the case concerned interpretation (rather than implication) of terms, the court found that the company did not have any termination rights. The court reached this conclusion on the basis of the meaning of the specific termination provisions in the licence agreement as well as the broader commercial context.

Restraint of trade doctrine inapplicable

As only the foundation had termination rights under the licence agreement, the company then argued that the agreement operated in restraint of trade because it imposed unusual and unreasonable limitations on the company’s ability to act.

The court disagreed, finding that:

1. the licence agreement contained no legally relevant restraint. The company appeared to be seeking to renegotiate what it now considered to be uncompetitive terms; if the court were receptive to that approach, however, it would introduce uncertainty into contractual interpretation; and
2. even if a legally relevant restraint could be identified, the licence agreement’s commercial context meant it was less likely to violate any public policy test of reasonableness than, for instance, an employment contract entered into between two parties of unequal bargaining power. The court again stressed that the restraint of trade doctrine does not operate to allow parties to renegotiate contracts after the fact.

This judgment re-emphasises the importance of clear drafting in licence agreements as well as the significant obstacles restraint of trade arguments face in commercial contexts.

Judgment: Zaha Hadid Limited v The Zaha Hadid Foundation