Beware of the Form Contract (Part One): Business-to-Business Terms and Conditions

Author: McMillan Metro Editor Date: 05/31/2012

Categories: Commercial Leasing, Corporate and Business Law

In an effort to promote commercial success, most businesses rely upon contracts, generally written by attorneys, which contain the business’ “standard terms.” Proprietors are often told that these contracts are not negotiable, and they frequently sign such agreements regardless of the incredibly burdensome provisions. However, most of these provisions can be mitigated, if not completely avoided.

In a business-to-business situation, we strongly urge our clients to allow us to review any contracts prior to execution. More often than not, we have found that the businesses providing the goods or services pursuant to a boilerplate agreement are willing to modify their conditions.

This series of articles will address certain language in agreements that should be modified to protect your interests.

The Automatic Renewal

In some contracts, if the Buyer does not provide notice within a certain amount of time prior to the end of a contract, the contract will automatically renew under the same terms and conditions. This is particularly burdensome to the Buyer if, after five years, it must continue purchasing the same goods/services when technology has changed, the costs of goods/services sold have decreased, or the goods/services are no longer needed.

We suggest the automatic renewal provision be removed. Alternatively, if the Seller is unwilling to cooperate with the Buyer, we suggest you notify the Seller by letter as soon as the contract permits that you will not be renewing. In this instance, you have solved the problem and permitted flexibility for yourself at the end of the term. If you think you may want to renew the contract, make sure to note the date notice is due and set reminders so that you do not inadvertently renew the contract automatically.