How to Terminate an Automatically Renewed Contract

A contract that automatically renews itself upon the completion of the original period is sometimes called an "evergreen" contract or a "perpetual lease." Whether the item is large or small, an automatically renewed contract must adhere to certain terms, allowing the consumer to opt-out of the contract without further obligation. Contracts that renew automatically are common in consumer-club purchases, residential leasing and consumer credit services. In the case of real estate, there are additional regulations.

Difficulty: Moderate

Instructions

Things You'll Need:

• Original contract

1. Read the terms of service carefully on your contract. This is the "fine print" that is often on the back of the agreement. The terms will specify an initial period, during which your contract is in effect. If the contract concerns a club-type service, such as a book club or a flower-of-the-month club, it will define the method by which you can cancel before the contract automatically renews.

2. Follow the instructions to cancel your membership in a purchasing club. There is usually a specified time before the renewal, during which you can cancel by sending a written notice to the company. Send the cancellation early enough to allow time for the company to update their records. Some services require 30 days, or longer, before the end of the contract to cancel successfully.

3. Request an immediate cancellation if the service provider does not comply with the terms of service. A breach of contract by the provider may allow you to get out of your contractual duties before the end of the contract period. This is often limited to serious breaches, such as a failure to provide the service or failure to warranty the product. If this is the case, document the issue and call the company with your request. Follow up with a written letter.

4. Mail your written request by certified mail and purchase a return-receipt. While most companies will honor the terms of the original contract, some may claim that they did not receive your cancellation in time to stop the contract from renewing. A return-receipt will verify that they received your letter in time.

5. Pay an early termination fee if you are canceling the renewable contract ahead of time. Some companies, such as cell phone service providers, will allow you to cancel at any time but you must pay a fee to do so. The fee to cancel may not be more than the minimum service amount you would have paid if the contract were still in effect. For example, if your cell phone plan has a minimum $40 payment per month, the cell phone provider may only charge you the $40 for each month left on your contract in the current remaining service agreement.

6. Look for a highlighted clause in any real estate contract that automatically renews itself. Real estate law requires some type of highlighting to draw attention to such a clause. The pertinent text may be underlined, emboldened or in a larger font, but it must stand out from the rest of the text.

7. Visit with a customer service agent if you miss the deadline to cancel your contract. Many companies depend upon customer satisfaction and word-of-mouth to grow their business, and they may let you out of your contract even if you did not abide by the terms of service.

Tips & Warnings

• Keep your original contract and make a note on your calendar of the renewal date. Send your letter of cancellation well in advance of the deadline.
• Read the fine print. Although it's not ethical, some unscrupulous companies do not adequately inform you of their renewal policy and you only find out when you're committed to another term.

Resources

• Ask a free legal question at LawGuru.

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