To borrow a famous expression, “Nothing great lasts forever”. Although business terms within a contract may remain consistent over time, generally, auto-renew provisions are not recommended for inclusion within a purchasing agreement. Auto-renew provisions extend the duration of an agreement on the same terms and conditions after the expiration of the initial contract period. Overall, the inclusion of an auto-renew provision avoids the need for the parties to renegotiate the terms of the agreement after the expiration of the initial contract period. This provision can be advantageous with respect to agreements that are low risk and do not require re-negotiation at the conclusion of the contract period. However, for those complex or high-risk transactions where pricing and other important terms are subject to change over time, an auto-renew provision is not ideal. Ultimately, before including an auto-renew provision in a purchasing agreement, you should evaluate whether the terms relating to the services, goods or products being procured are subject to change at the conclusion of the contract period. If you decide to include an auto-renew provision, you should ensure that a provision that allows you to terminate without cause is included in the purchasing agreement in case your initial assessment was incorrect.

This entry was posted on Wednesday, October 1st, 2008 at 10:53 am and is filed under Agreements, Contracts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.