Principle: pacta sunt servanda
Many people assume that contracts can simply be cancelled at will or that purchased products can be returned. This is a mistake*, especially in Switzerland. In general, the Latin proverb applies: pacta sunt servanda, i.e. contracts must be fulfilled.
Termination based on law or contract
Even though the Federal Supreme Court has ruled that there are no «perpetual contracts» (BGE 114 II 159, «beer supply case», in German), contracts for an indefinite period can in principle only be terminated if the law (e.g. for leases, Art. 266 ff. CO) or the contract provides for termination in a clause. Why? Nobody may bind themselves excessively (Art. 27 CC). Where the limit lies depends on the case: on how intensely a party is bound and on what it receives in return. The beer supply case shows how lawyers find that limit: the brewery had paid for the bar of a restaurant, to be written off at 5 % per year; from this figure the court concluded that the parties had expected twenty years of beer purchases in return. Twenty years were therefore permissible, and the termination after eleven years came too early. The court did not invent a limit; it found it in the economics of the contract. Two Swiss rules matter in practice: a service contract (mandate) may be terminated by either party at any time (Art. 404 CO), and any long-term contract may be terminated for good cause, for example after a serious breach by the other party. Other legal systems have their own rules on termination; check them before you rely on a clause.
*The idea that contracts can be cancelled at will probably stems from the fact that, especially in e-commerce, most dealers now provide a «money-back guarantee», i.e. the possibility to return products without giving a reason. In addition, the EU Consumer Rights Directive provides for a general fourteen-day right of withdrawal from contracts concluded online in the business-to-consumer area (B2C, consumer contracts) for the EU. Such a general right of withdrawal, in particular for contracts concluded online, does not exist in Switzerland; whether it exists in your country is a question for the chatbot.
Fixed-term contracts and automatic renewal
Contracts for a fixed period of time, on the other hand, expire at the end of that period. In practice, there is a need for fixed-term contracts to be automatically renewed under certain conditions. Such clauses are often wrongly formulated by mixing contracts for an indefinite period with contracts for a fixed period. The legally correct wording is as follows:
This agreement is concluded for an indefinite period. It may be terminated by giving notice of [number of days or months] at [date], for the first time at [date at the end of the minimum period provided for, de facto the specified period].
Exercise: your own subscription
Take a subscription you actually have (streaming, gym, mobile phone, software). Find its terms and conditions and let a chatbot of your choice (Claude, ChatGPT & Co.) answer three questions: How long does the contract run, and does it renew automatically? With what notice period, and through which channel, can it be terminated? Is there a right of withdrawal under the law of your country? Check the answers against the terms and the statute.
In class: we compare: who found the longest minimum term, the shortest notice window or the most restrictive termination channel?