Question:
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Ken,
Enjoy the informative Emails, Thanks!
Is there a set statute for the Evergreen clause for contract renewals? Our contracts are for an initial three year term then automatically renew for another year, unless provided notice the customer wants to cancel 30 days prior to the anniversary date. We have a competitor here in Missouri whose contracts renew for another three years unless the customer is provided 90 days notice.
Rex Huffman
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Answer:
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I do not believe there is a statute restricting automatic renewal of consumer contracts in your state. You can check the states that do have such laws at https://www.kirschenbaumesq.com/autorenewal.htm
My standard form contracts for residential subscribers is for 5 years and renews month to month. That's what I recommend. If your state does enact legislation restricting the auto renewal clause it will most likely follow other states and except month to month renewal from the statute.
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Comment:
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Ken,
Wait one! Bob Worthy president of Secur Technologies Inc., implies that the alarm industry may be the one industry justified in being allowed auto-renewals. But like most people that make such claims, fails to follow through with any substantial reasoning, hoping instead that we all bob our heads in unison over something we all seem to want so dearly.
If we want to say that legislators' jobs are to finally turn towards doing what's best for the citizens of the country, we should all be able to produce some pretty strong arguments for being 'the exception'. That's what every industry says and hopes for about their own cash cow. Maybe there are valid reasons to do this? If so, let's hear them, come to an agreement, and all push with the same voice.
It's not always possible to get a renewal signed he says? But there's sure time to sign up the original. He also says 'we are most likely not insured' if we have an expired contract with the customer. What exactly does that mean? Maybe Ken should re-word something on the monitoring agreement.
Zeke Lay, President
Comtec Electronic Systems Inc.
Oklahoma
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Response:
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The alarm industry does stand out as one industry where automatic renewal is essential to the subscriber, and legislators should carefully consider that before restricting or outlawing such clauses in alarm contracts. If your contract has a specific term, which it will and should, then without an automatic renewal clause it will come to an end. Period. You would not provide notice, just shut off the service. No burglar alarm; no panic alarm; no environmental alarm; no fire alarm. That simply does not serve the public interest or welfare. I don't believe there would be any immediate risk if some other types of services that rely on the automatic renewal clause [TV services for example] terminated without notice. But the security business is obviously different. There's your justification for the clause.
All my standard form contracts provide for month to month renewal. All current state laws restricting the enforcement of the automatic renewal clause except month to month renewal. PA permits longer renewal once notice is given. Florida has a new law. Check it out at https://www.kirschenbaumesq.com/autorenewal.htm
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Question:
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Ken,
I want to thank you for your daily emails and have learned a lot from them.
I would like your advise on the following situation – one of our major customers is insisting on removing the renewal clause from their contract with us. Our contract is for the installation, service, monitoring and inspection of fire and burglar alarms. What do you think?
Thanks for your time,
Elizabeth Wargacki
Merchants Burglar Alarm Systems
Wallington, NJ
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Answer:
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I think you should give in, remove the automatic renewal clause, and then shut down service when the contract expires, sending notice to the AHJ that fire alarm monitoring has been terminated. If it's a lease then pull the system out. Let the subscriber pay to put it back in. OK, so that's a bit tough advice. See above for why your subscriber needs the auto renewal clause. But, if the subscriber wants it out - take it out. It should not be a deal breaker on your end.