Auto-Renewal Clauses Definition

An auto-renewal clause is a contractual provision that automatically extends the term of the agreement for a set period of time, unless either party gives notice of its intention to terminate the agreement prior to the end of the current term. This type of clause is typically used in leases and subscription-based contracts.

The key benefits of an auto-renewal clause are that it provides stability and continuity for both parties, and gives the parties ample time to renegotiate the terms of the contract before it expires. However, auto-renewal clauses can also be disadvantageous if the terms of the contract are no longer favorable to one or both parties, or if one party significantly outperforms the other during the initial term. In these cases, it may be better to allow the contract to expire so that each party can assess their options and choose a new path forward.