In the recent decision of Anheuser-Busch International Inc. et al. v Commonwealth Brewery Ltd, the Bahamas Court of Appeal held that a three-to-six-month range was reasonable notice for termination of an informal contract.
The first appellant, Anheuser-Busch International Inc (ABI), had entered into an informal and unwritten distribution agreement with the respondent, Commonwealth Brewery Limited (BHL), for distribution of ABI’s beer products in the Bahamas in around 1975. Some forty years later in August 2015, ABI terminated the agreement for business reasons and provided a three month notice period to BHL (eventually extended to fourth months). BHL argued (among other things) that given the longstanding nature of the distribution agreement, the notice period should have been three and a half years.
In the first instance, the trial judge determined that fifteen months would have been a reasonable period and that four months’ notice amounted to a breach of contract. The Court of Appeal disagreed with the trial judge’s finding. Relying on a number of English authorities, including Alpha Lettings Ltd v Neptune Research & Development Inc and the more recent judgments of W. Nagel v Plucznkik Diamond Co NV and Zymurgorium v Hammond of Knutsford PLC, the Hon. Sir Barnett P held that on the facts a range of three -to-six months was a reasonable notice period and accordingly, ABI had not breached the distribution agreement. The decision was influenced by the informal relationship which existed between the parties and that the absence of a written agreement was a crucial component in determining what is considered reasonable notice.
The judgment serves as a reminder (and perhaps a warning) of the distinction the court will draw between formal, written versus informal, unwritten contracts. Get it in writing – it is better to be safe than sorry!
Decisions in courts of appeal in offshore jurisdictions are persuasive and are therefore of interest to how other offshore courts might deal with a similar situation in the future.