AUTOMATIC RENEWAL CONTRACTS
Don’t be misled by automatic renewal provision in your contract. In some cases, they may be invalid under New York law. Lets say that you have a 5 year contract with a computer maintenance company. The contract is about to expire and now you found a cheaper and more reliable company. You let the contract lapse and you sign with the new company. However, your old company continues to send you bills. When you contact them to complain, they tell you "sorry, but you did not read the fine print": If you did not notify them 6 months before the expiration date that you did not wish to renew, it was automatically renewed for another 5 years.
Do you have any remedy? In this case, and in many like them, you do. New York’s General Obligation Law sections 5-901 and 5-903 provides that no matter what is stated in your contract, if it is for a lease of personal property or is a contract for services, maintenance or repair to or for any real or personal property, the one providing the service must serve on you a writing, calling to your attention the renewal provisions in the contract. It must be served on you either personally or by certified mail at least 15 days and not more than 30 days prior to the time the contract calls for you to give notice whether you will renew or not. If such notice is not given, you may cancel the contract at any time, just paying for the service provided up to the time of the cancellation. However, if you do receive the notice and do nothing, you will be stuck with the renewed contract.
The courts have been very liberal in expanding the meaning of personal property. The statutes have been applied to include intellectual property, servicing MRIs, leases of vending machines, and answering services. It does not apply to personal services contracts such as providing legal services or other type of advisory services. These provisions were specifically designed to protect small businessmen who unwittingly find themselves stuck with a contract they did not want.
If you continue to receive bills from a supplier, or a vendor claims that you are still stuck in a contract you thought had expired, don’t just assume they are right because the contract says that you did not give the proper notice. Immediately contact a lawyer. Most likely, they are wrong.
Kim Juhase, ESQ.
Partner, Novak Juhase & Stern, LLP
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