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Many commercial relationships run for years on informal terms, or under a written agreement that never says how it can be ended. When one side decides to leave, the question is how much warning it owes the other. In Anheuser-Busch International Inc v Commonwealth Brewery Ltd [2026] UKPC 8, the Privy Council gave detailed guidance on that question. The appeal came from the Bahamas, but the Board relied heavily on English authority. The decision will be persuasive in English courts and is directly relevant to businesses here.
The dispute
In 1975 Burns House Ltd (“BHL”), a Bahamian distributor, agreed orally with Anheuser-Busch International Inc (“ABI”) that BHL would have the exclusive right to distribute AB InBev’s beers, including Budweiser, in the Bahamas. The agreement was never written down and ran for about 40 years. BHL was not tied to AB InBev. It was free to sell competing products, and by 2015 AB InBev brands accounted for around 15% of its beer turnover and under 10% of its turnover overall.
In August 2015 ABI announced that it would end the arrangement. The reason given was that BHL’s group was owned by Heineken, a global competitor, and the arrangement no longer fitted AB InBev’s strategy of keeping closer control of its international brands. There was no criticism of BHL’s performance. Notice of about three months was later extended to 1 December 2015, giving just over three and a half months in total.
BHL argued that fair notice was three and a half years, roughly a month for each year of the relationship. It stopped paying invoices of around $598,000 and counterclaimed for about $2.4 million. The only issue was how much notice was reasonable. Both sides accepted that the law implied a term requiring reasonable notice.
Three courts, three answers
The Bahamian trial judge decided that fifteen months was reasonable, largely because that was how long BHL took to recover its lost profits. The Court of Appeal disagreed, holding that a reasonable range was three to six months, so the notice given was enough. The Privy Council unanimously agreed with the Court of Appeal and dismissed BHL’s appeal.
The purpose of notice
The central message is about what notice is for. Reasonable notice lets the recipient bring the relationship to an orderly end and make substantial progress towards alternative arrangements. It does not protect the recipient’s profits while it finds replacement business. Lord Hodge described a loss of turnover and profit during that adjustment as “a risk of commercial life”, especially for a party that never negotiated a fixed notice period. The trial judge’s focus on lost profit was the “most striking error”.
The Board also stressed that both sides’ interests count. During the notice period each party must keep performing a contract that one of them wants to end, and the other is trying to move on from. A very long period makes that harder, and it ties the terminating party to an arrangement it has chosen to leave.
The factors courts will weigh
The Board identified seven considerations from the case law. The list is not exhaustive, and each factor matters only in so far as it affects the recipient’s ability to adjust.
- A missing written contract matters mainly because it shows the parties chose not to agree a notice period, which points against a long one. A well-established, regular relationship is harder to replace than an ad hoc one.
- Length of the relationship. Length of the relationship matters only as a guide to how significant the business is to the recipient and how easily it can adjust. The Board rejected any analogy with employment relationships, where long service earns longer notice.
- Significance to the recipient’s business. The Board called this “of central importance”. A relationship that supplies a large share of turnover is hard to replace. A small share is easier.
- Resources committed. If only a few staff service the relationship, they can usually be redeployed. A large dedicated workforce points to longer notice.
- Extraordinary expenditure. Special capital spending, made with the other party’s knowledge and not yet recouped, may justify more time. Ordinary running costs do not.
- Third-party commitments. Contracts with others that cannot readily be unwound may justify a longer period.
- Continuing performance. Both parties must keep performing during notice, and the longer the period, the harder that is. This weighs strongly against lengthy notice.
The Board added that market custom and the time of year (for example, a seasonal trade) may also be relevant.
Applying the factors
On the facts, the factors pointed clearly towards a shorter period:
- BHL could sell competing products.
- ABI’s brands made up only about 10% of its turnover.
- Staff costs were ordinary expenditure, and the staff could be redeployed.
- BHL’s refrigeration upgrade benefited all its refrigerated products, so it was not extraordinary expenditure for the ABI arrangement.
- ABI had a legitimate interest in appointing a replacement distributor promptly.
- A long notice period risked BHL “taking its foot off the pedal” while still handling ABI’s brands.
The Board said that, had ABI’s products made up a large share of BHL’s turnover, the long and stable relationship would have supported a longer period. The facts were against BHL.
What this means for businesses
Do not assume that length of relationship means length of notice. Forty years of trading produced just over three and a half months. Courts look at dependence and the ability to adjust, not loyalty.
Dependence matters most. A business that relies on one customer, supplier or distributor for much of its turnover is in a stronger position than one for whom the relationship is a sideline. Dedicated staff, plant or commitments to third parties can also support longer notice.
Terminating parties should do their homework. Before serving notice, work out how the factors apply to your relationship. If the notice is too short, the recipient can claim damages for the shortfall.
The safest course is to agree the position in writing. Implied reasonable notice is a fact-sensitive backstop that is uncertain for both sides. Well-drafted agreements should cover:
- the notice period, and any minimum term;
- post-termination obligations;
- stock buy-back arrangements;
- the treatment of third-party commitments;
- the consequences of early termination.
The English Court of Appeal reached a similar conclusion in Zymurgorium Ltd v Hammonds of Knutsford Plc ([2023] EWCA Civ 52), where three months was upheld, so the Privy Council’s approach fits existing English authority.
How we can help
If you are considering terminating a long-standing commercial relationship, or have received a notice you think is too short, we can advise on your position and on drafting agreements that avoid these disputes. Please contact me via [email protected]
This article is for general information only and does not constitute legal advice. Please take advice on your specific circumstances.
