Over the last several years, I have had several business clients who have work-wear service contracts with big-name service providers. These contracts always seem to contain similar language which requires the customer to provide written notice (usually by certified mail) within some certain time period prior to the expiration of the contract term. If the customer fails to follow the notice requirements to not renew their agreement, the contract automatically renews for another term.
These automatic renewal provisions (sometimes called “evergreen clauses”) are common, even expected, in service agreements, but are also typical in rental agreements and other membership-based businesses (after all who wants to have to re-sign up for Costco every year?). The justification makes sense- inaction by both parties to an ongoing arrangement tends to suggest that both would like the arrangement to continue on consistent terms.
However, where it gets tricky, and where clients get upset, is where we see onerous burdens on the customer in either of two scenarios:
1. the lead-time needed to notify the service provider of the customer’s intent to not renew (e.g. “on or before 180 days prior to the end of the existing term”; and/or
2. the exacting method required to actually notify the vendor of the customer’s intent not to renew the agreement (e.g. “by albino carrier pigeon to the top of Mount Everest under a full moon”).
These are the areas where things may get a bit fuzzier from the legal side. Remember that these contracts are almost universally standard-form agreements drafted by the vendor and thus vendor-friendly. As of the time of this writing, Ohio has no existing statute to inform us of what “reasonable” looks like for either the “time” or “method” of notice metrics. Enter the lawyers. Generally speaking, it seems that courts are hesitant to interfere with the requirements spelled out in the contract. That said, there are some courts that have found that strict compliance with hyper-technical notice requirements may not be necessary.
Regardless of which side you may fall on- just getting to the point where you face the choice of having to either pay a penalty to the vendor or pay a lawyer to try to convince a judge that you don’t have to pay is not a great place to be for a client. Please talk to a lawyer about your contract’s auto-renewal provision BEFORE you sign on the dotted line.
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