Auto-renewal clause
An auto-renewal clause extends a contract for another term automatically unless one side sends notice of non-renewal before a set deadline.
What it means
An auto-renewal clause, also called an evergreen clause, keeps a contract running after its initial term ends. Unless one party says it does not want to renew, the agreement rolls into a new term on the same conditions. The renewal term may match the original term or be shorter, such as month to month.
The deadline is what catches people. Say you sign a one-year software subscription that renews for another year unless you give notice at least 60 days before the end date. If you remember in week 50, you are already too late and owe another full year of fees.
Auto-renewal usually favors the vendor, whose revenue continues without a new sale. It can also suit buyers who want uninterrupted service without renegotiating. Many US states have automatic renewal laws requiring clear disclosure, reminders or easy cancellation, but most protect consumers and only some reach business contracts, so whether one applies depends on the state and the deal.
What to watch for
- Find the exact non-renewal deadline and put it on your calendar. A deadline tied to “the end of the then-current term” moves with every renewal.
- Check how notice must be sent. Some clauses only accept written notice to a specific address or by certified mail, which can make an email or in-app cancellation worthless.
- Look at the length of each renewal term. A one-year renewal is a very different commitment from a month-to-month rollover.
- Check whether prices can rise at renewal and by how much. Some clauses let the vendor switch you to its then-current list price.
- See whether the vendor must remind you before renewal. Some state laws require reminders for certain contracts, but many business contracts carry no such duty.
Example clause
This Agreement will automatically renew for successive one-year terms unless either party gives the other written notice of non-renewal at least sixty (60) days before the end of the then-current term. Fees for each renewal term may increase by up to five percent (5%) over the fees for the prior term.
If you do not send written notice at least 60 days before the term ends, you are committed to another year, possibly at a higher price.