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AUTOMATIC RENEWAL CLAUSE

This topic continues to raise questions.  I just had a question from Florida asking about the "evergreen" clause.  There is no "evergreen" clause in Florida, and no prohibition on automatic renewal, as far as I know.

    Alarm contracts have automatic renewal clauses in them. Some contracts are for an initial term of 3 to 5 years, some 10 or more. The renewal can be for 1 year, 5 years, or whatever you make it.

    An automatic renewal clause should and will be enforced (it's legal) unless:

1. there is a statute that prohibits it

2. there is legal case law that refuses to enforce it (usually on the grounds that the particular provision is unconscionable [shocks the conscience of the court).

    I am not aware of a Federal law that deals with the automatic renewal clause (if you know of one let me know the statute).

    Some states do have statutes that deal with the issue. In New York for example an automatic renewal clause is not enforceable unless the provider of the service (the alarm company) sends a separate notice advising the customer of the provision. The notice has to be sent by certified mail or personally delivered between 15 and 30 days prior to the renewal date. Failure to give the notice renders the automatic renewal provision unenforceable.

    Check the statutes in your state to find out if there is a similar provision that you must comply with.   The statutes are posted state by state on our web site at http://www.kirschenbaumesq.com/autorenewal.htm.

    If there is no state law provision then you only need to be concerned that your contract term does not run afoul of common sense or decency. A 5 year initial term with a 10 year renewal written in obscure print buried in the contract may not be enforced. I think you get the idea.

    Because I am concerned that 1)more states will be addressing the automatic renewal clause,  2) most alarm companies won't develop a practice of sending out required renewal notices, and 3) I think it's a good practice to enter into a new contract with the subscriber within the original term, particularly when it's a longer initial term, I have provided for month to month renewal in the standard contracts.

    The standardized contracts that I offer to the trade are 5 year initial term  for residential and 10 years for commercial.   Fire Inspection is 7 years and CCTV Sales is for 10 years initial term.  

    For a list of the standardized contracts see our web site at https://www.kirschenbaumesq.com/alarm2.htm

    Another little mistake I think some companies make is to send out a new contract and call it a renewal contract. The phrase "renewal contract" has caused many different types of problems in litigation. One thing you need to be mindful of is that the contract, now labeled a "renewal contract" may have several provisions in it that have triggering events that will not be taking place with the renewal contract, such as an installation of equipment, or a provision that says the contract is for 5 years after the installation of equipment. In a renewal situation that provision can cause the subscriber to claim that the equipment was installed long time ago when the first contract was signed and therefore the 5 years ran before the renewal contract was even signed, thereby permitting the subscriber to cancel anytime; not a position you need to litigate and one you can easily avoid by knowing what is in your contract.

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