The Connecticut Attorney General has sued an alarm company for failure to comply with the state's automatic renewal clause. You can read the statute on my web site at http://www.kirschenbaumesq.com/autoconnecticut1.htm
One of the staples in an alarm contract is the automatic renewal provision, which generally provides that the contract will self renew at the end of each term. Since the business model for the alarm industry is building recurring revenue the automatic renewal clause fits. However that provisions is not without consequences.
The first issue you have to focus on is whether the states in which you enter into contracts has any statutory requirements regarding automatic renewal. I have posted statutes state by state on this issue, and we will be updating this site shortly. But you need to be updated on your state's requirements and comply with any new laws that are enacted. At least one state does not permit automatic renewal, and other states have different notice requirements that you must follow to alert your subscriber that the contract will self renew.
If you fail to comply with notice requirements, or if you are not permitted to have a renewal clause, you will need to be concerned with what happens if you don't comply and you go into a renewal period. The applicable statute may provide for your penalty, such as the contract is unenforceable. That raises the issue of whether you can continue to rely upon the protective provisions in your contract into the renewal period, such as the exculpatory and limitation of liability clauses. Does the contract become cancelable by the subscriber during the unauthorized renewal period, or simply void and nonexistent? I don't have the answer and I don't suggest you test it.
Relying upon renewal clauses also does not give you the opportunity to have an updated contract with your subscriber. Just like your technology, the recommended contracts change frequently and need updating. Using a contract that you "borrowed" 10 years ago is almost as bad as no contract at all. When you rely only upon the renewal clause it also limits your contact with your subscriber; you have no reason to communicate, so that your only communication is sending invoices and perhaps service calls. A new contract gives you the opportunity to meet with your subscriber and update not just the contract, but the alarm system.
There can be other legal ramifications for non compliance with automatic renewal clauses, as the Connecticut Attorney General is now pursuing. Continuing to invoice subscribers after you should know the contracts expired can constitute deceptive businesses practices, which carries its own penalties.
My standard contract forms do contain an automatic renewal clause. However, because nearly all alarm companies will not comply with statutory notice requirements my contracts provide for only month to month renewal, which generally is excepted from the statutory notice requirements. This renewal will at least continue the protection of the contract provisions in the event of a loss, but will have limited value for pricing your contracts for sale.
The better practice is to make an effort to enter into a new contract with your subscriber a year before the existing contract is about to expire. Offer some incentive for the new contract, and do not refer to this new contract as a "renewal" contract; it's simply a contract. You can state in the new contract that it supersedes the existing contract.