Many business contracts end but the parties who signed them don’t realize it and continue to do business as if the agreement still existed.
This can create legal disputes that lead to expensive lawsuits when one party suddenly decides to walk away and quit performing (e.g., stopping payment). That’s true whether the agreement is between business and consumer (b2c) or two businesses (b2b).
Ideally, you’ll have some sort of tickler system in place that lets you know when each contract’s current term ends and what you need to do prior to the end of that term.
Now it’s true some agreements are set up to renew. That can be for an additional term of the same length. However, how it renews can vary.
For example, a contract can auto-renew unless one of the parties provides XX days prior notice to the other party of an intent not to renew. Or it can be set up that both parties must affirmatively state they want to renew the contract (often on the same terms and conditions with a possible price adjustment).
There are also business contracts (e.g., gym membership contracts) that are commonly set up to convert to a month-to-month agreement upon expiration of the initial term.
When you’re reviewing your agreements to determine what you must do, a good place to start are the “term and termination provisions” plus the “notice” provisions. Note that there may be a separate section for early termination. And you’ll want to know what that requires too.
Now if you need help with your business contracts (not disputes), set up a phone consultation with Business Lawyer Mike Young.N
