Businesses buying services from suppliers need to consider whether these contracts will be automatically renewed, which can be an expensive mistake when they are no longer needed or when a new provider has been appointed.
What is the responsibility of the supplier to warn the customer of an auto-renew clause, and can the customer exit these agreements easily if it fails to notice it?
Whilst contracts between a business and a consumer provide the customer with some level of statutory protection, B2B customers are relatively exposed. It is therefore particularly important to understand what your business is being asked to sign up for and to challenge terms you are not happy with before the agreement is entered into.
Typically, with a B2B contract, both parties are free to contract on whatever terms they decide. For a handful of specific provisions, it may be possible to challenge a B2B contract on the basis that the relevant terms are unfair, but this can be difficult to prove.
A customer should therefore ensure that either:
- The contract is for a fixed term and does not automatically renew; or
- Any automatic renewal provisions are acceptable within the context of the termination provisions. Check that notice may be served within any fixed term or renewal period to expire immediately at the end of that period and diarise a reminder well in advance of the notice deadline to consider whether or not to serve notice in good time.
Where a customer is required to give notice to terminate, it is also vital to adhere to any “notice” provisions which govern how notice is given. Often, email notice alone may not be sufficient, and notice may be required by post. The customer must factor in any timescales set out in the notice provisions, in addition to the basic notice period.
Customers also need to be aware of other terms which could be expensive, including provisions for price rises. Price rises will rarely be open-ended (and may give the customer the opportunity to terminate if they are unhappy with the price rise) but there may be provisions permitting the supplier to increase its prices in line with RPI or other objective measures.
From a wider perspective, businesses should have a clear policy in place for which individuals have the authority to negotiate and sign any supply contract. Where a contract is not on that businesses’ own standard terms, it is always prudent to obtain professional legal advice on the document before signature in order to highlight potential areas of risk, including renewal and termination provisions.
Always know what your business is signing up to, the full cost and the terms for the end of the contract, and note important dates, so that contracts can be ended when the services are no longer needed.
Peter Kouwenberg is a partner at Taylor Walton Solicitors www.taylorwalton.co.uk
