What can your company do if you have signed up to a contract which automatically renews itself?

By July 6, 2017news

What if your company has signed a contract with “Tie-you-in Limited” which contains an “auto-renewing” term – such as, say, you must give a minimum of three months notice before the end of the first 12 months period to end the contract. Otherwise it renews for a further 12 months.-

Argue you are in fact a consumer

“Consumers” have considerable protection under the Consumer Rights Act. The Court may regard as unfair, taking into account all the circumstances of the contract. A term which has the effect of: –

…automatically extending a contract of fixed duration where the Consumer does not indicate otherwise, when the deadline fixed for the Consumer to express his desire not to extend the contract is unreasonably early.

In the Regulations, a “Consumer” is a natural person who is (in summary) not signing the contract for business purposes.

However, if you can show that you signed the contract partly for personal reasons and/or the benefit of the contract was only incidental regarding your business, you may be able to bring the contract under these Regulations.

So, for example, you might be a “Consumer” if you sign a contract as a business which buys and improves properties, but also use each one to provide a home for your family – i.e. the contract is purportedly with your business but is intended to benefit both you and the business.

Argue Incorporation of Terms

Any term must be incorporated to be enforceable.

Terms and conditions which are immediately visible to a contracting party will form part of the contract, however long and complicated the agreement might be.

There is normally no obligation for Tie-you-in Limited” to draw the automatically renewable  term to your attention.

However, there is a principle that where there is a contractual provision which is particularly unusual or onerous, but not immediately visible, Tie-you-in Limited  would not be able to rely on the clause unless they have done enough to bring the clause fairly to your attention, particularly where a contract may have been signed under pressure of time or other circumstances.

Argue UCTA:

The Unfair Contract Terms Act (generally known as UCTA) limits a company’s ability to avoid to business contracts in respect of terms regarding contractual performance, misrepresentation and restriction of contractual remedies.

UCTA does not normally allow a business to challenge unfair standard terms which relate to its own performance or obligations – which would generally mean that businesses are not protected against a term automatically extending the contract.

However certain respected legal commentators have said that you could bring an auto-renewal clause under UCTA if you could show that it allowed Tieyouin to render a contractual performance substantially different from that which was reasonably expected of it.

I have not seen any case law on this point.

Argue Ambiguity:

If there is any ambiguity at all in Tieyouin’s auto renewal clause, you could argue that the clause should be construed against Tieyouin – known in English law as the “contra proferentem” rule.

Argue Performance:

You should look at the history of Tieyouin’s performance and consider whether there is any defect in this performance which would legitimately allow you to bring the contract to an end.

Argue Misrepresentation:

Can you remember what was said or written at the time the contract was made?

Perhaps Tieyouin’s salesman made promises which it has not lived up to.

Give Notice:

If all else fails, make a diary note to give notice at a convenient time to your company, or if you are not particularly concerned about the business relationship with Tieyouin, if notice has to be given “at least X months prior to …” why not give a written notice straightaway by a recorded delivery letter.

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