Your Contract Renews Next Month. Do You Know on What Terms?
By Nadine Deeb, Esq. · Published Most of the negotiating energy in a SaaS deal goes into the first sale: price, scope, the service levels, the liability cap. The renewal terms are agreed in the same document, usually quickly, and then nobody reads them again until a renewal is already in motion.
That may work for the first sale. It becomes harder to rely on when renewal terms are spread across a growing customer base.
First, what this post is not about
There is a separate body of law about consumer subscriptions, covering automatic renewal statutes, cancellation flows, and what regulators consider a dark pattern. We cover that in subscription cancellation laws in AZ, CA and TX, and if you sell to consumers that post is the one you want.
This post focuses on the renewal language in a business-to-business agreement: what the contract says will happen at the end of the term, and which party that language tends to favor.
The five terms, and what each one decides
Term length. How long the initial commitment runs. A twelve-month term and a thirty-six-month term are not the same product sold at different prices. They allocate the risk of being wrong about each other differently.
Auto-renewal. Whether the agreement continues without anyone signing anything. This is the clause that decides what happens by default, and default is what usually happens.
The notice window. How far in advance a party must say they are leaving. This is the term most often missed, because it runs backwards from a date nobody has calendared. A ninety-day window on an anniversary eleven months away is easy to agree to and easy to forget.
Price-increase rights. Whether the price can move at renewal, by how much, and on what notice. If the agreement does not address renewal pricing, identify that gap before the renewal discussion begins.
Termination for convenience. Whether either side can end the agreement without cause, and on what notice. Often mutual, sometimes not, and worth checking which.
They interact. Auto-renewal with a long notice window and no price-increase right is a different arrangement from auto-renewal with a short window and an agreed uplift, even though both are “auto-renewing.” Reading one term alone can mislead.
Where the asymmetry usually sits
The party that drafted the paper generally drafted the renewal terms to suit itself. That is not sharp practice. It is what drafting is.
The practical consequence is that if you sold on your own agreement, the renewal terms likely reflect your preferred position, and the question is whether they are still the ones you want. If you sold on a customer’s fifty-page MSA, the renewal terms may be less aligned with your preferred position. Renewal can provide a natural point to identify the term you want to discuss with the customer.
Renewal can be an occasion to propose a change while the parties are discussing the next term.
When to leave them alone
A post that says every clause needs attention is a brochure. Plenty of renewal terms are fine as written:
- A short initial term with a mutual termination right. Neither side is trapped and the clause is doing its job.
- A renewal you actively want. If the account is healthy and the price is right, an auto-renewal is a feature.
- A notice window you have actually calendared. The problem with notice windows is being surprised by them, not their existence.
- Terms on paper you did not draft and cannot change, where the commercial relationship matters more than the clause. Knowing what it says still gives you a clearer basis for deciding whether to raise it.
- Anything you are reviewing only because a checklist said so, with no renewal approaching and no dispute in view.
A short diagnostic
Three questions, in order:
- Can you produce the renewal terms for your three largest accounts? Not describe them, produce them. If not, start by locating the applicable agreement and renewal provision for each account.
- Is the notice window calendared? Not known. Calendared, with a reminder before it opens.
- If you wanted to change the price at renewal, does the contract let you? If the answer is “probably,” it is worth reading the clause.
Start with the renewal provision, then read any provisions it expressly incorporates.
What this looks like in practice
If all three answers are comfortable, there may be nothing to change this quarter. If one is not, begin with the specific provision that creates the concern.
For many companies, the first task is to identify the renewal terms for the accounts that matter, calendar the applicable notice dates, and decide whether the next renewal should proceed on the current language.
If you want help evaluating or revising the renewal language in your customer agreement, contact Accord & Shield Legal to schedule an initial consultation. An initial consultation is not legal advice.
Frequently asked questions
Does an auto-renewal clause bind us if we forget to give notice?
That depends on what the clause says and the law that governs the agreement. The practical point is that an auto-renewal clause is written to operate without anyone doing anything, so forgetting is the case it is designed for rather than an exception to it.
Can we raise prices at renewal if the contract does not mention it?
It depends on the agreement as a whole. If the agreement does not address renewal pricing, identify that gap before the renewal discussion begins.
Is a long notice window a bad term?
Not by itself. A ninety-day window is only a problem if nobody has calendared it. The same clause is unremarkable in a company that tracks renewal dates and awkward in one that does not.
We signed on the customer’s paper. Is there anything to do?
Renewal can provide a natural point to identify the term you want to discuss with the customer. Which term to raise is a commercial question as much as a legal one.
What is the smallest useful first step?
Identify the renewal terms for the accounts that matter and calendar the applicable notice dates.