An auto-renewal clause, sometimes called an evergreen clause, renews a contract automatically at the end of its term unless one party gives notice. For vendors, it protects recurring revenue. For buyers, it is convenient when the product is valuable and well used. It becomes a problem when nobody is watching: the contract renews at the same volume, often at a higher price, for another full term.
How the clause typically works
A common wording looks like this:
"This Agreement will automatically renew for successive periods of 12 months unless either party gives written notice of non-renewal at least 60 days before the end of the then-current term."
Three details decide how much risk it carries:
| Term | What to check | Lower risk | Higher risk |
|---|---|---|---|
| Notice period | How early you must act | 30 days | 90+ days |
| Renewal term | How long you are locked in | Monthly or 1 year | Same multi-year term again |
| Price on renewal | What you pay next term | Fixed or capped | "Then-current list price" |
The cost of missing it
When an auto-renewal passes unreviewed, you typically keep paying for the same volume, including shelfware, often at a higher price, and lose your negotiating leverage until the next term ends.
How to protect yourself
What to ask for at signature
The cheapest time to fix an auto-renewal clause is before you sign. Most vendors will accept some of these:
- A notice period of 30 days or less.
- A renewal term of one year, even if the initial term is longer.
- A cap on price increases at renewal, for example 3% or CPI.
- A written renewal reminder from the vendor 90 days before the notice deadline.
- The right to reduce quantities at renewal.
- Renewal "for a term equal to the initial term" on a multi-year deal.
- Renewal at "then-current list price".
- Notice periods of 90 days or more without a reminder.
- Notice that must go to a postal address only.
Sending notice correctly
Check how notice must be given: often in writing, to a specific address or contact, sometimes by a specific method. Keep proof that it was sent and received. If you want to renegotiate rather than leave, read the clause carefully, because in some contracts notice ends the agreement rather than opening a negotiation.
Before you send notice
How MI One helps
Frequently asked questions
Are auto-renewal clauses enforceable?
Generally yes in business-to-business contracts, provided they are clearly stated. This is not legal advice; check with counsel for your jurisdiction.
Can we remove auto-renewal from a contract?
Often, if you ask before signing. Many vendors accept a renewal reminder or a shorter notice period instead.
Should we always send notice just in case?
Not always. In some contracts notice terminates the agreement. Send it when you are ready to leave or have confirmed it opens renegotiation.