In ordinary English parlance, the words "indefinite" and "perpetual" are often used as synonyms. The dictionaries define "perpetual" as unlimited in time and "indefinite" as something without a fixed or exact limit. In some cases, the word "indefinitely" has a secondary meaning of being perpetual and the two words often overlap in day-to-day conversation. But, in law the two words have different meanings when interpreting contracts. A contract that has an indefinite duration does not necessarily mean that it is perpetual.
The distinction between these two expressions came up for consideration before the Court of Appeal of England and Wales (Civil Division) in Zaha Hadid Limited v. The Zaha Hadid Foundation, [2026]. The facts of this case are interesting. Dame Zaha Hadid was a world-famous Iraqi-born British architect who developed an international architecture practice in the name of Zaha Hadid Limited and had registered trademarks for her name. By a license dated May 1, 2013, she licensed the marks to the company in which she was then the sole shareholder. On her death on March 31, 2016, the trademark passed to the Zaha Hadid foundation - which she had set up to preserve her work and legacy - and the Foundation became the licensor.
Under an agreement, the company (licensee) had to pay a royalty of 6% of its ‘Net Income’ from Licensed Services’. That term was defined to cover all services provided by the licensee whether or not they used the trade mark. After some time, the licensee company contended that the licence fee was too high and claimed that it had the right to terminate the contract after giving reasonable notice. The Zaha Hadid Foundation did not agree and contended that the licensee had no right to terminate at all, because the agreement was for an indefinite period and would continue unless the licensor chose to end it. The matter went to court and the most important issue was the scope of clause 12, which dealt with duration and termination. Clauses 12.1 and 12.2 are reproduced below:
12.1. This agreement shall commence on the Effective Date and shall continue indefinitely, unless terminated earlier in accordance with this clause 12.
12.2. This Licensor shall have the right to terminate this agreement on giving the Licensee not less than 3 months’ written notice of termination.
Clause 12.3 is lengthy, but it specified that the licensor could terminate the agreement with immediate effect if there were specified acts of default on the part of the licensee. The trial judge held that the contract contained no term entitling the company to terminate on reasonable notice. He also held that the agreement would not amount to restraint of trade and rejected the claim of the licensee company on grounds of public policy and reasonableness as well.
Before the Court of Appeal, the company contended that clauses 12.1 and 12.2 did not mean that the contract was “perpetual” and that it had the right to terminate the contract on giving reasonable notice. After considering the submissions of the licensee company and the licensor foundation, the Court of Appeal reversed the view of the single judge and allowed the appeal. Paras 43, 44, and 45 contain the key conclusions of the Court of Appeal.
It was held that a contract which is intended to be perpetual is different from the one in which the duration is indefinite. It held that the contract had to be interpreted on the basis of a two-stage reasoning process. The first was to determine whether, as a matter of construction, it was the common intention of the parties that the agreement to pay royalty was to be in perpetuity. If the contract was not intended to be perpetual, then, even though the duration was indefinite, it could be terminated on giving a reasonable notice. The Court held that the question is not decided by presumptions either way, though commercial parties are not normally expected to bind each other in perpetuity. In this case, the licensor had the right to terminate the agreement by giving not less than 3 months' notice under clause 12.2, but that did not mean that the licensee had no such right. The fact that the contract was to continue indefinitely did not necessarily mean that the parties intended it to be perpetual.
Most importantly, the court held that to describe a contract as being “perpetual” is something fundamentally different from a contract where the duration is indefinite. Accordingly, the court concluded that the company had the right to terminate the agreement by giving a reasonable period of notice. It further pointed out that what is reasonable would depend on the facts and circumstances of each case.
In India, there is no decision that analyses this distinction between an agreement which is “perpetual” and “indefinite” in the manner the judgment in Zaha Hadid does.
In Classic Motors Limited v. Maruti Udyog, (1997), the Delhi High Court held that unless an agreement expressly states so, it cannot be perpetual. On the facts, it held that both parties to the contract were entitled to terminate it without assigning any reason and by giving 90 days' notice. It must be noted that the dealership agreement had an express termination clause which provided for a 90-day notice period.
While the words used in the UK are 'indefinite and perpetual', in India, Section 105 of the Transfer of Property Act, 1882 permits a lease of immovable property to be either made for a certain time or to be in perpetuity. These are leases of immovable property for agricultural or manufacturing purposes. In the case of leases for any other purpose, the lease is deemed to be from month to month and liable for termination by a 15-day notice. Indian law thus recognises the concept of a perpetual lease. Section 106 provides that the duration of a lease, if not specified in the contract, would be deemed to be a lease from year to year and liable for termination either by the lessor or the lessee by giving six months' notice.
In India, there are a number of cases dealing with immovable property. Most of the cases deal with whether a lease is for an indefinite period or for a permanent period. In Sivayogeswara Cotton Press v. M. Panchaksharappa (1962), the Supreme Court held that if there was a lease of an agricultural land to set up a factory and no period was mentioned in the lease, the presumption is that it was intended to create a permanent tenancy. The fact that the lessee had the right to give up possession did not make a difference on the issue of permanency. If the landlord also had the right to serve notice of ejectment, then it could be treated as a tenancy at will. The High Court had held that the lease, being for an indefinite period, lasted only for the lessee’s lifetime, applying the Privy Council’s rule in Baboo Lekhraj Roy v. Kunhya Singh (1876-77). The Supreme Court reversed this view and held that the lease, read as a whole, to be a permanent tenancy.
The decision of the Court of Appeal in the Zaha Hadid underscores the importance of carefully drafting contractual clauses, particularly when the contractual period is expected to be for a larger period of time. The UK court rightly pointed out that, generally, commercial parties do not bind themselves forever. Similarly, in India as well, a contract will not be treated as perpetual unless there are clear words to indicate the intention of perpetuity. In the absence of such words, even a contract for an indefinite period can be terminated by either party on reasonable notice.
Arvind Datar is a Senior Advocate of the Supreme Court of India.