Recovery

What is Auto-renewal clause?

A contract provision that automatically extends the agreement for additional terms unless one party gives notice — frequently a source of silent vendor cost drift.

An auto-renewal clause (also called evergreen clause) is a contract provision that extends the agreement for successive terms unless either party gives written notice of non-renewal before a specified deadline.

Standard form

> "This agreement shall automatically renew for successive 12-month terms unless either party provides written notice of non-renewal at least 60 days prior to the end of the current term. Pricing for renewal terms shall be at the vendor's then-current published rates."

Why they cost businesses money

Auto-renewal clauses create asymmetric awareness. The vendor watches the calendar; the customer usually doesn't. The default outcome is: renewal happens, prices adjust to "current rates," and 3–8% annual cost drift becomes the norm.

Across the vendor contracts Fruxal has audited, auto-renewal cost drift accounts for $8K–$32K/year of overpayment by year 3 of a typical SMB vendor contract.

How to neutralize

1. Calendar every renewal — put the "last day to give notice" date with a 30-day reminder 2. Send notice of intent to renegotiate on every renewal — even if you intend to stay 3. Get one competitive quote — establishes leverage 4. Push for new clause language — substitute "no automatic renewal; renewal requires written agreement"