March 12, 2011
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Comment
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Hi Ken,
here is the latest Assembly Bill coming out of committee in Trenton, NJ today. Does not look good for automatic renewal if this gets passed. [see text of proposed bill below]
G. Duffy
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Response
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Thanks for bringing this to our attention. New Jersey, like most states, does not have a law restricting automatic renewal provisions. This proposal will affect consumer contracts, applies to any renewal that is effective after 6 months of the initial term, and which renews the term for more than one month. The proposal is typical.
The good news is that the Standard Form Contracts already comply with this proposed legislation because renewal is month to month. We anticipated that any new legislation restricting automatic renewal would except month to month.
I also continue to advocate getting new contracts signed before the expiration of the initial term, rather than relying upon the automatic renewal. While this practice may not be practical for the giant companies, for most of us mere mortals the better practice is to maintain subscriber contact and relations. Within the initial 5 year term for residential, or 10 year term for commercial, you should be able to find some time to survey and inspect your subscriber's system, recommend some updates, and get new contracts signed.
You can check your state's auto renewal statute here, and if you see we missed any please let me know. http://www.kirschenbaumesq.com/autorenewal.htm
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A3770
2
AN ACT concerning service contracts 1 and supplementing P.L.1960,
2 c.39 (C.56:8-1 et seq.).
3
4 BE IT ENACTED by the Senate and General Assembly of the State
5 of New Jersey:
6
7 1. As used in this act:
8 “Automatic renewal provision” means a provision under which a
9 service contract is renewed for a specified period of more than one
10 month if: (1) the renewal causes the service contract to be in effect
11 more than six months after the day of the initiation of the service
12 contract; and (2) the renewal is effective unless the consumer gives
13 notice to the seller of the consumer’s intention to terminate the
14 service contract.
15 “Consumer” means a natural person who buys other than for
16 purposes of trade any tangible personal property that is distributed
17 in commerce and that is normally used for personal, family, or
18 household purposes and not for business or research purposes.
19 “Seller” means any natural person, firm, partnership, company,
20 corporation, association, or other similar legal entity engaged in
21 commerce that sells, leases, or offers to sell or lease any service to a
22 customer pursuant to a service contract.
23 “Service contract” means a written contract for the performance
24 of services over a fixed period of time or for a specified duration.
25
26 2. a. Any seller that sells, leases, or offers to sell or lease any
27 service to a consumer pursuant to a service contract that has an
28 automatic renewal provision, unless the consumer cancels that
29 contract, shall disclose the automatic renewal provision clearly and
30 conspicuously in the contract or contract offer.
31 b. Any seller that sells or offers to sell any service to a
32 consumer pursuant to a service contract the term of which is a
33 specified period of 12 months or more and that automatically
34 renews for a specified period of more than one month, unless the
35 consumer cancels the contract, shall provide the consumer with
36 written or electronic notification of the automatic renewal
37 provision. Notification shall be provided to the consumer not less
38 than 30 days nor more than 60 days before the cancellation deadline
39 pursuant to the automatic renewal provision. This notification shall
40 disclose clearly and conspicuously:
41 (1) That unless the consumer cancels the contract the contract
42 will automatically renew; and
43 (2) Methods by which the consumer may obtain details of the
44 automatic renewal provision and cancellation procedure, whether by
45 contacting the seller at a specified telephone number or address, by
46 referring to the contract, or by any other method.
47 c. As part of the seller’s routine business practice, where an
48 error has caused the failure to comply with the provisions of this
A3770 BENSON, MORIARTY
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section, the unearned portion 1 of the contract subject to the
2 automatic renewal provision shall be refunded as of the date on
3 which the seller is notified of the error.
4
5 3. The following shall be exempt from the provisions of this
6 act:
7 a. warranties;
8 b. maintenance agreements;
9 c. service contracts on tangible property if the tangible
10 property for which the service contract is sold has a purchase price
11 of $250 or less, excluding sales tax;
12 d. service contracts with a bank, trust company, savings bank,
13 savings and loan association, credit union, insurance company, or
14 health maintenance organization organized under the laws of any
15 state or the United States; and
16 e. service contracts issued, offered, or sold:
17 (1) by a public utility to the extent that the public utility is
18 regulated by the Board of Public Utilities, or by a person providing
19 central heating and air conditioning services, but only with respect
20 to a service contract regarding the product sold to a consumer, or
21 installed or repaired for the consumer at the consumer’s household,
22 by the utility or by a person providing central heating and air
23 conditioning services; or
24 (2) to any person other than a consumer.
25
26 4. a. This act shall not limit rights or remedies available to a
27 consumer under any other law.
28 b. If a seller does not comply with the provisions of this act,
29 the automatic renewal provision shall be void and unenforceable.
30
31 5. A violation of any of the provisions of this act shall be an
32 unlawful practice and a violation of P.L.1960, c.39 (C.56:8-1 et
33 seq.).
34
35 6. This act shall take effect on January 1, 2011, and shall apply
36 to service contracts entered into on or after that date.