Auto-Renewal
An auto-renewal clause extends a contract for a further fixed term automatically unless one party gives notice to end it before a set deadline.
What it does
Most B2B contracts run for an initial term: twelve months, twenty-four months, sometimes longer. An auto-renewal clause (also called an evergreen clause) decides what happens when that term ends. Instead of the contract expiring, it rolls over into a new term on the same conditions, and keeps doing so until someone stops it.
The clause usually sets three things: the length of each renewal term, the deadline by which notice of non-renewal must be given, and the form that notice must take. A typical version renews for twelve months at a time and requires written notice at least 90 days before the current term ends.
For a supplier, the clause secures predictable revenue without a renegotiation every year. For a customer, it avoids service interruption if nobody remembers to sign a new agreement. Both are legitimate benefits. The problems start when one side forgets the deadline.
Example wording
This Agreement shall commence on the Effective Date and continue for an initial term of twelve (12) months. Thereafter, it shall renew automatically for successive periods of twelve (12) months each, unless either party gives the other written notice of non-renewal at least ninety (90) days before the end of the then-current term.
Risks for SMBs
The notice window passes unnoticed. The deadline to cancel is not the end date. It is weeks or months earlier. A company that decides in November not to continue a contract ending 31 December has usually already missed a 90-day window and is locked in for another year. This is the single most common way SMBs end up paying for software, subscriptions, and services they no longer use.
The renewal term is as long as the original. A one-year contract that renews for a year at a time is manageable. A three-year contract that renews for three years is a serious commitment triggered by silence. Check the renewal length, not just the initial term.
Price changes ride along. Many contracts pair auto-renewal with a right for the supplier to increase prices at renewal. If notice of the new price arrives after the non-renewal deadline, the customer has no practical way to reject it. See the price increase page.
Notice formalities are strict. If the clause requires notice by registered post to a specific address, an email to the account manager may not count. Suppliers do enforce this.
Jurisdiction matters. Some countries restrict automatic renewal in standard terms, particularly for consumers, and a few apply similar limits to business customers or cap the length of renewal periods. Do not assume a clause is enforceable, or unenforceable, without checking local law.
Common variants and negotiation points
- Shorter renewal periods. Ask for month-to-month renewal after the initial term, or a renewal term no longer than twelve months, whatever the initial term.
- Shorter notice window. 30 days is a reasonable middle ground for most services. 60 days is common for enterprise software. Anything beyond 90 days deserves pushback.
- Renewal reminder obligation. Require the supplier to send a written reminder 30 to 60 days before the non-renewal deadline. Some suppliers accept this, and a few jurisdictions require it for certain contracts.
- Price lock at renewal. Tie any price increase to a notice period that ends before the non-renewal deadline, so the customer can still walk away.
- Notice by email. Specify that notice by email to a named address is sufficient. This removes the most common formality trap.
Related clauses
- Notice: how and where notice must be delivered to count.
- Termination for convenience: the right to exit without cause, which changes the stakes of auto-renewal.
- Price increase: how renewal and price changes interact.
This page is general information about a common contract clause. It is not legal advice and does not account for your jurisdiction, industry, or the specific contract in front of you. Talk to a qualified lawyer before relying on it.
Tracking renewal dates, notice periods, and other contract obligations is what Trackado does.