Statutory Provisions May Affect Open-Ended Contracts

In Maryland, open-ended contracts may be affected by statutory provisions enacted after the contracts were executed. An open-ended contract is a contract that does not provide a specific date of expiration by its own terms, but will terminate only after either or both parties end the contract. In a recent Maryland case, a supplier and a dealer entered into an open-ended contract in 1984, which provided that the contract could be terminated with 120 days notice. In 1998, Maryland enacted the Maryland Equipment Dealer Act, prohibiting a supplier from terminating a dealer contract without good cause. The supplier subsequently attempted to terminate the open-ended agreement by providing notice of 120 days, as stated in the contract; however, the Maryland Court found that the supplier could only terminate for good cause because of the Maryland Equipment Dealer Act. The Court found that parties are presumed to know the law when entering into contracts and because the contract at issue had a 120 day notice provision, the open-ended contract renewed every 120 days. Therefore, upon the renewal of the contract, the new statutory provision was incorporated. Thus, companies entering into any open-ended contract must be aware of any statutory changes affecting the terms of the contract. If you have any questions, please contact Michael W. Siri at siri@bowie-jensen.com.