What is the difference between an automatic renewal clause and a negotiated renewal?

An automatic renewal clause (evergreen clause) extends the contract automatically for a specified period unless one party provides notice of non-renewal. A negotiated renewal requires both parties to actively agree to new terms before the contract continues, allowing for adjustments to meet changing needs.

How much notice is typically required to prevent automatic renewal?

Notice periods vary widely but commonly range from 30 to 90 days before the contract’s expiration. Some enterprise agreements require longer notice periods of 180 days or more. Always check your specific contract terms, as inadequate notice can result in unwanted renewal.

What states have laws regulating automatic renewal clauses?

At least 30 states have enacted laws governing automatic renewals, with California, New York, Illinois, Virginia, Oregon, and Colorado having particularly comprehensive requirements. These laws typically mandate clear disclosure, affirmative consent, easy cancellation methods, and renewal reminders.

Can automatic renewal clauses be legally enforced?

Yes, automatic renewal clauses are generally enforceable when properly drafted and implemented. However, enforceability depends on compliance with applicable state laws, proper disclosure, and whether the clause might be considered unconscionable in particular circumstances.

What should a company do if it misses the deadline to prevent automatic renewal?

If you miss a non-renewal deadline, first review the contract for any grace periods or early termination rights. Consider negotiating with the counterparty for an amicable release or modification. Document all communication carefully, as some state laws offer consumer protections that might apply even after a deadline has passed.

Contract Clauses: Articles, Reports, and More

Contract Clauses

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