Minimum Contract Duration Clause template clause

    Updated: 27 March 2026

    Please note: these example clauses are intended as a starting point, not as legal advice. Always adapt the text to your specific situation and have important contracts reviewed by a legal professional.

    Clause text

    Article [X] - Minimum Contract Duration

    1. This Agreement is entered into for a fixed period of [number, e.g. 36] months, commencing on [date] (the "Minimum Term"). During the Minimum Term, neither Party may terminate this Agreement, except as provided in paragraphs 3 and 4 of this Article.

    2. Upon expiry of the Minimum Term, this Agreement shall be automatically renewed for successive periods of [number, e.g. 12] months, unless a Party terminates the Agreement by giving [number, e.g. 3] months' written notice before the end of the then-current period.

    3. Early termination during the Minimum Term is permitted only:
    (a) in the event of a material breach that remains unremedied after written notice specifying a cure period of [number, e.g. 30] days;
    (b) in the event of bankruptcy, suspension of payments, or cessation of business activities of the other Party;
    (c) in the event of a change of control as defined in Article [X] of this Agreement.

    4. If the Client terminates this Agreement during the Minimum Term other than on the grounds set out in paragraph 3, the Client shall owe the Supplier a breakage fee equal to [percentage, e.g. 50]% of the remaining monthly fees until the end of the Minimum Term.

    5. The breakage fee referred to in paragraph 4 shall be immediately payable and shall not prejudice the Supplier's right to additional damages, to the extent that the actual loss exceeds the breakage fee.

    What does this clause mean?

    A minimum contract duration clause establishes that the agreement cannot be terminated for a specified period. It provides the supplier with investment certainty and typically offers the client a more favourable rate or better terms in return.

    Paragraph 4 addresses the financial consequences of early termination. The breakage fee at 50% of the remaining fees is a common market rate that compensates the supplier for lost revenue without making the full contract payable. Under Dutch law, a breakage fee qualifies as a penalty clause (boetebeding, Art. 6:91-6:94 BW). This means a court may moderate the fee if fairness clearly requires it (Art. 6:94 BW), for example when the fee is disproportionate to the actual loss. A declining scale (see the tips below) reduces that moderation risk. According to Loio (2026), 71% of all contracts are never monitored for compliance after signing. The risk is that you sign a minimum term that no longer suits your business situation, without anyone flagging the renewal date in time.

    The exceptions in paragraph 3 are essential: in cases of material breach, insolvency, or a change-of-control scenario, you must always be able to terminate early. Without those exceptions, you are locked in with a contracting partner that is no longer performing.

    When should you use this clause?

    Use a minimum contract duration in agreements where the supplier incurs significant setup costs, for example in IT implementations, managed services, commercial property leases, and outsourcing contracts. The higher the upfront investment, the longer the minimum term is justified.

    Note: for consumer contracts, the Dutch Wet Van Dam does not primarily restrict the initial contract duration, but rather limits tacit renewal terms and notice periods. After the first renewal, consumers can always terminate with a maximum notice period of one month. This B2B template is not intended for consumer contracts. According to World Commerce & Contracting, 9.2% of annual revenue is lost due to poor contract management. A significant portion of that comes from contracts that auto-renew on unfavourable terms. Set a reminder in your contract management system well before the end of the minimum term.

    Customize these elements

    • 1Align the duration with the payback period of the investment. A 6-month SaaS implementation typically justifies a minimum term of 24-36 months
    • 2Adjust the breakage fee percentage to the service's cost structure. For services with high variable costs (staff), 30-40% is reasonable; for services with low variable costs (licences), 60-75% may be defensible
    • 3Add a hardship exception: if external circumstances fundamentally alter the contract's value, parties can renegotiate rather than terminate immediately
    • 4Consider a declining breakage fee: the further into the minimum term, the lower the percentage (e.g. 50% in year 1, 35% in year 2, 20% in year 3)

    Sources

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