Business Contracts: What you need to know about automatic renewals and extensions

Effective May 1, 2011, a new Wisconsin law requires businesses to notify customers of automatic renewal or extension provisions in business contracts.

According to the statute, “business contracts” are contracts “entered into for the lease of business equipment, if any of the business equipment is used primarily in this state, or for providing business services.” The statute does not apply to contracts that allow customers “to terminate an automatically renewed or extended contract period by giving the seller notice,” but only if the contract requires one month or less of advanced notice from the customer.

Referred to as 2009 Wisconsin Act 192, the law impacts business contracts involving equipment and services in a variety of industries (construction, food service, consulting, IT, and manufacturing, to name a few). To remain compliant, you are required to notify your customers as to how they may decline renewal or extension of business contracts. If you fail to notify your customers, the renewal or extension provisions will become unenforceable.

The notice requirement consists of both an initial disclosure about the automatic renewal or extension provision in the contract and a reminder notice in certain cases.

These notices must include information regarding:

  • any increase in charges that will apply under an automatic renewal or extension
  • what the customer must do to decline renewal or extension
  • the date by which the customer must decline renewal or extension

The statute also allows customers to bring an action or counterclaim for damages against a seller for violations. Damages can include twice the amount of the damages incurred by the customer, including reasonable attorney fees.

Now is a good time to go back and take a look at your business contracts to ensure compliance with this new law, as it applies to all business contracts entered into, modified, or renewed after May 1, 2011.

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