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Contract renewal clauses are also commonly known as “evergreen clauses”, and they automatically extend an agreement for another set period of time unless one party, typically through written notice, terminates the agreement. In Illinois, these types of clauses are legal, but are subject to specific requirements to provide notice of the renewal period under some circumstances.
Typically, if you do not opt out and provide the appropriate written notice, you could be stuck for another term of the contract.
Automatic renewal clauses may be disputed as they are frequently buried within a contract, and a customer may not even realize the clause is there. Legally, these clauses are required to be clear and conspicuous within the agreement. If they are not and violations of the notice of upcoming renewal occur, this could cause legal issues for the party that provided the contract.
Next, contracts that appear to provide for indefinite durations without a finite term can run into problems of enforceability.
By way of example, delivery service contracts, janitorial contracts, software contracts, and licensing agreements often include renewal provisions. In my experience, the service industry tends to have the highest rate of renewal provisions in their contracts and agreements.
Craig Donnelly is a determined, attentive business law attorney serving Illinois. Since 2004, he’s helped business owners just like you plan around automatic renewal clauses, helping save his clients valuable time, money, and resources.
Have questions, or in need of business law assistance with an evergreen renewal clause? Reach out to Donnelly Law, LLC for an initial consultation today.
If you intended to opt out of a contract with a renewal clause and you fail to do so, you could wind up being stuck in the contract for another term, which could be a year or even longer.
Not only are you stuck with the immediate term of the contract, but if market conditions may have changed dramatically, that could result in you being on the wrong end of a market swing. Both in the short term and in the long term, there’s a lot of risk in not opting out of a contract in time.
If you do have a contract with an automatic renewal clause, make sure you note the date in a journal or on a calendar to remind yourself or your staff to end the agreement before that date.
Your business should be clear about your renewal structure, and having a centralized system that tracks various service agreements and their end dates is important.
The agreements themselves should be scrutinized, and you should also question any auto-renewal clauses prior to signing the agreement. Because in many cases, those terms can be negotiated out of the contract, particularly if you’ve been a longer-term customer with whoever is seeking that clause.
For more information on Illinois evergreen clauses and business contract law, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (630) 274-6196 today.
Craig Donnelly is a determined, attentive business law attorney serving Illinois. Since 2004, he’s helped business owners just like you plan around automatic renewal clauses, helping save his clients valuable time, money, and resources.
Have questions, or in need of business law assistance with an evergreen renewal clause? Reach out to Donnelly Law, LLC for an initial consultation today.