Auto Renewals—How To Stay In Control?

Auto Renewals—How To Stay In Control?

Have you ever read something like this: “Once the contract runs out, it automatically renews for another 12 months unless either party gives the other written notice of termination at least 60 (sixty) days prior to expiration.”? Such auto renewing contracts renew and continue to run for a period of time without notice and auto-renew until one of the parties terminates them.

If you want to stay in control of your supplier contracts, you need to know which contracts have an auto renewal clause and when you have to send a termination notice to avoid auto renewing. The notice period is not always 30 days. In some cases, it could be 2 or 3 months or more. If this is left to chance, you can end up with a lot of auto renewed contracts that you don’t need or want.

What you need to do is notify the supplier in writing that you don’t want to auto renew for another period. If you fail to provide timely written notice, the contract will be auto-renewed for another period.

Here’s your plan:

Step 1: Read the contract terms carefully. Understand when the contract expires and what is the termination notice—the period of time you have to cancel the contract before it auto renews. For example, if the contract runs out on 15 June 2018 and the termination notice is 30 days, this means that you need to notify the supplier by 15 May 2018. Make sure that you are on the safe side and allow at least 2 months—send a termination notice no later than 15 April 2018.

Step 2: See if the contract states where you should send a termination (cancellation) letter. Also, bear in mind that it might take some time for the supplier to process your request. If you can’t find the information about where to send the termination letter or how long it takes the supplier to process your request, call the supplier and ask them.

Step 3: Draft a termination letter. State the contract in question and the effective date of termination. State that once this contract expires, you do not wish to renew for another period but terminate it. Usually, it is not necessary to state a reason for the termination. Include your contact details and sign the letter. Send the letter by registered mail and keep the mailing receipt.

Contractpedia can help you remember to send termination notices. When you go to the details page of a contract, you can see information about auto renewal and termination notice. There you can create an alert an email notifications to remind you to send a timely contract termination letter before it’s too late. Feel free to contact us if you want to learn more.