Imagine you sign a contract and are relieved to finally secure that business deal. Months and years pass, and the contract fades from your immediate concern. Suddenly, unexpected renewal fees and obligations you never anticipated hit you. This could be a harsh reality for your business if you unknowingly agree to contracts with evergreen clauses.
Ignoring evergreen clauses can trap your business in undesirable situations
Evergreen clauses, or automatic renewal clauses, allow contracts to continue indefinitely beyond their initial term. These clauses often fly under the radar, buried in fine print, until they trigger unexpected and potentially detrimental consequences:
- Unexpected costs: You might be paying for services you no longer use.
- Limited flexibility: Long-term commitments can hinder your business’s ability to adapt to market changes.
- Missed opportunities: Being tied to an old contract might prevent you from exploring better business options.
- Legal disputes: Attempting to exit a renewed contract can result in disputes and litigation.
Suppose you sign a three-year service agreement with an automatic renewal clause. The contract stipulates that you must provide written notice of cancellation 90 days before the end of the term.
Missing this deadline could lock you into three more years of service, no matter how your business or finances change. This can be financially draining, especially for small businesses with limited budgets.
While Maryland does not have specific legislation addressing unfair evergreen clauses. Still, courts may scrutinize these provisions for fairness and enforceability.
Safeguarding your business for years to come
Being proactive can save your business from future headaches. If you find your business tangled in such a clause, it is essential to obtain legal advice as soon as possible. A skilled attorney can provide the legal experience needed to protect your company’s future.