Evergreen Clauses: A Sticky Situation
Evergreen clauses, or automatic renewal clauses, are quickly becoming a hot button issue when it comes to business to business transactions. We have all dealt with them at one time or another. Imagine that you have subscribed to a product or service, and for whatever reason, you find yourself not using the service or product anymore. You call the company and attempt to cancel the service, but they inform you that their license agreement prevents you from simply cancelling without written notice and you will be billed for another service period.
Most evergreen clauses read like this: “Each Term shall automatically renew for subsequent periods of the same length as the initial Term unless either party gives the other written notice of termination at least thirty (30) days prior to expiration of the then-current Term.” If you’re like many, then you may have missed this in the fine print. Doing so would obligate you to continue the service for another term until you have explicitly stated in writing at least 30 days prior that you want to discontinue service. But just how enforceable are these clauses? Here’s a look at what some states are doing:
- Illinois: In 2000, Illinois added an “Automatic Renewal Contract Act” basically making an evergreen clause unenforceable unless it is “clear and conspicuous”. What this means is that if the clause isn’t bolded with all caps, it cannot be enforced.
- New York: In 2006, a statute was passed that states that automatic renewals were unenforceable for service, maintenance or repair unless the entities providing the service notifies the person receiving service in writing, either personally or through certified mail, calling attention to the automatic renewal clause in their contract. This must be no more than 30 days or no less than 15 days prior to re-billing.
- Wisconsin: In 2012, Wisconsin passed automatic renewal legislation that states that evergreen clauses must be disclosed at the start of service and a formal reminder stating the person’s contract will automatically be renewed well in advance of the new term.
The rule of thumb is to always read the fine print. Doing so will not only familiarize you with the terms of your contract, but it will also prevent unexpected surprises in the future.
For an experienced legal team who will work hard to bring you results, call the McAllen business lawyers at Pruneda Law Firm, P.L.L.C, at 956-702-9675.