On May 13, 2015, the US Court of Appeals for the Seventh Circuit held in Burford v. Accounting Practice Sales, Inc. that Accounting Practice Sales, Inc. (APS) could not terminate its contract of indefinite duration with William J. Burford at will. Although the contract was for an indefinite duration and therefore presumably terminable at will under Illinois law, the parties overcame this presumption by expressly stating in the contract that APS could terminate only if Burford breached the agreement. (No. 14‐2692 (7th Cir. May 13, 2015).)

William J. Burford and Accounting Practice Sales, Inc. (APS) were parties to a contract under which Burford agreed to market and facilitate the purchase and sale of accounting practices on APS' behalf in various territories. Under the terms of the agreement, it renewed automatically every year for another one year period. However, the agreement also:

APS terminated the contract with Burford, who then sued the company under a breach of contract claim. The US District Court for the Southern District of Illinois granted APS summary judgment against Burford's claim on the theory that their contract was of indefinite duration and was therefore terminable at will under Illinois law.

Burford appealed the district court's decision.

The Seventh Circuit reversed the district court's decision granting APS summary judgment on the breach of contract claim and held that APS could not terminate the contract at will.

After reviewing the contract terms, the Seventh Circuit agreed with the district court that the contract was for an indefinite period. The contract renewed itself without the need for either party to take action and there was no way for either party to prevent automatic renewal. Under Illinois law, there is a presumption that contracts of indefinite duration are terminable at will. However, relying on Illinois Supreme Court precedent, the Seventh Circuit found that this presumption can be overcome if the parties clearly agree to place limits on when they may terminate the agreement.

The court found that APS and Burford had overcome this presumption by including the statement that APS "cannot terminate this agreement unless it is violated by Burford." The court reasoned that the plain reading of this statement is that APS could terminate the agreement only if Burford breached it. By contrast, the agreement expressly permitted Burford to terminate at any time by providing notice to APS.

The Seventh Circuit noted that the outcome of this case would be different and APS would have been able to terminate at will if the agreement instead contained a permissive and nonexclusive termination provision, such as "APS may terminate this agreement if it is violated by Burford."

This decision highlights the importance of parties carefully reviewing both the contract's:

For sample term and termination language, see Standard Clause, General Contract Clauses: Term and Termination.