In Anheuser-Busch International Inc and another (Respondents) v Commonwealth Brewery Ltd (Appellant) (The Bahamas) [2026] UKPC 8, the Privy Council restated the considerations relevant to determining the reasonable period of notice for termination of a contract.

Burns House Ltd (BHL) and Anheuser-Busch International Inc (ABI) were parties to a long-standing oral agreement for the exclusive distribution of ABI’s beer and other beverage products in the Bahamas (Agreement). Following a change of ownership, ABI gave BHL a termination notice with an effective notice period of three and a half months.

BHL disputed the notice and ceased payment of invoices, claiming that a reasonable notice period would be three and a half years, being one month for each year of the Agreement. In the proceedings issued by ABI to recover the debt, BHL claimed a right to set off losses alleged to arise from termination of the Agreement. At the time of termination, revenue derived from distribution amounted to approximately 10% of the overall turnover of BHL.

There was no dispute that the Agreement contained an implied term requiring reasonable notice of termination. On appeal, the issue was how the court assessed whether a period of notice of termination is reasonable. The trial Judge found that 15 months was a reasonable period based on considerations including the financial loss suffered by BHL following the termination. The Court of Appeal reversed the decision, finding that a notice of three and a half months was ‘within the range’ of a reasonable period.

On appeal, the Privy Council extensively reviewed the English and Commonwealth authorities to determine whether the relevant factors had been considered by the lower courts in assessing the reasonable notice period. As a starting point, the Privy Council noted that in the absence of a termination clause, the parties are vulnerable to termination without notice. Implication of a term requires consideration of the parties’ ‘common purpose’ at the date the agreement was made. Further, the court will ordinarily infer that the ‘common purpose’ of reasonable notice is to allow the party receiving the notice to adjust its business and for an orderly end to the relationship.

Alternately, the issue of what period of notice is reasonable is determined in light of the circumstances at the time of the notice of termination. Based on the authorities, the Privy Council restated the factors relevant to assessing the reasonable notice period, to the extent those factors had a bearing on the common purpose, including:

1. 1. the length of the relationship and significance of the business to the party terminated;
   2. the circumstances of the parties such as the market in which they operated and the timing of the notice;
   3. any extraordinary capital investment in performance of the relationship in the short time before termination;
   4. contractual commitments to third parties that made termination more difficult; and
   5. the obligation of the parties to continue performing the agreement until the termination date – a factor weighing against a long notice period.

The Privy Council emphasised that the period of notice is not designed to protect the party terminated from all financial losses. Instead, it is designed to give them a period to adjust to the loss of the contractual relationship. In this regard, the period over which the termination reduced the profits of BHL was not a relevant consideration. The Privy Council took into account the interests of both parties and concluded that the relatively short period of notice was sufficient to allow BHL to adjust to termination of the Agreement, dismissing the appeal.

The decision can be found here.