We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is an Automatic Renewal Clause?

Lainie Petersen
By
Updated: May 16, 2024
References

An automatic renewal clause is a contract provision that renews a contract at the end of its term unless one party to the contract notifies the other by a certain date. These clauses are used in a variety of business contracts, including commercial and residential leases, subscriptions for consumer goods, and vendor contracts. Some consumer advocates have questioned the fairness of these clauses, leading some jurisdictions to make such clauses illegal or to require the issuers of these contracts to make an automatic renewal clause obvious to a purchaser of goods or services.

Many contracts set a definite time limit during which the contract is in force. One typical example for such a contract is a building lease, in which the landlord agrees to allow a tenant to use the premises for a specific length of time, often a year or more, as long as the tenant pays his rent and continues to obey the other provisions of the lease. Neither landlord nor tenant is at liberty to terminate the lease unilaterally unless the lease has somehow been violated. At the end of the lease, however, the tenant is free to move elsewhere, just as the landlord is generally able to not renew the lease and can then find a new tenant for the premises. The law treats other types of contracts similarly, and both parties are expected to fulfill their contractual applications during the time period established in the contract.

Some businesses insert an automatic renewal clause into their contracts as a way of attempting to hold on to their customers and to continue generating revenue. Customers who sign these contracts are obligated to inform the business of their decision not to extend the contract within a certain amount of time prior to the contract's end. If a customer or client fails to send this notification in time, the contract can be renewed even though the customer client did not explicitly agree to its renewal. A common example of an automatic renewal clause includes those used in the user agreements offered by many websites and online service companies that automatically charge a user's credit card at the end of each billing cycle unless the customer requests cancellation.

Consumer advocates and lawmakers have argued that some businesses use an automatic renewal clause in an abusive manner. These clauses may be buried in what may appear to be boilerplate contracts, and the customer or client may not be aware of the automatic renewal clause until the contract comes to an end and he is informed that he is obligated to continue paying for goods or services on an automatically renewed contract. These laws may also prescribe civil or even criminal penalties for businesses that fail to abide by these consumer protection laws.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Link to Sources
Lainie Petersen
By Lainie Petersen
Lainie Petersen, a talented writer, copywriter, and content creator, brings her diverse skill set to her role as an editor. With a unique educational background, she crafts engaging content and hosts podcasts and radio shows, showcasing her versatility as a media and communication professional. Her ability to understand and connect with audiences makes her a valuable asset to any media organization.
Discussion Comments
Lainie Petersen
Lainie Petersen
Lainie Petersen, a talented writer, copywriter, and content creator, brings her diverse skill set to her role as an...
Learn more
Share
https://www.smartcapitalmind.com/what-is-an-automatic-renewal-clause.htm
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.