- Supreme Court of Lithuania
LONG-TERM CONTRACTS - SUPPLY CONTRACT - BETWEEN TWO LITHUANIAN COMPANIES - REFERENCE TO UNIDROIT PRINCIPLES TO CONFIRM THE SOLUTION ADOPTED UNDER APPLICABLE DOMESTIC LAW (LITHUANIAN LAW).
CONTRACT FOR AN INDEFINITE PERIOD - REASONABLE TIME FOR A NOTICE OF TERMINATION - REFERENCE TO ARTICLE 6.199 OF THE LITHUANIAN CIVIL CODE AND TO ARTICLE 5.1.8 OF THE UNIDROIT PRINCIPLES
Two Lithuanian companies entered into a utility contract for the resupply of electricity, thermal energy, water. Parties have agreed that the contract is valid until the receiving party concludes direct agreements with the suppliers of electricity, water, thermal energy. The receiving party hold back 5 years on taking any further actions for concluding new contracts and supplying party terminated the contract by giving notice 3 months in advance.
The Court decided in favour of the receiving party. The Court held that according to the article 6.199 of the Lithuanian Civil Code as well as Article 5.1.8 of the UNIDROIT Principles, parties can terminate the contract for an indefinite period by giving notice a reasonable time in advance. Court pointed out that "reasonable time" should be explained in the context of the type of the contract and paying attention to party's possibility to prepare for the termination of the contract. In view of the fact that parties entered the contract for vital services (electricity, water, thermal energy) Court decided that giving a notice of termination of such contract 3 months in advance does not comply with the criteria of reasonable time.