Jessica Cox and Rose Massery, http://www.romanolaw.com/, discuss auto-renewal standards in contracts. A recent dispute between Isaac Asimov’s estate and Trident Media Group (TMG) may cause you to think twice before placing an automatic renewal provision in your contract.  In 2008, Asimov’s daughter, Robyn Asimov, and widow, Janet Asimov, hired TMG to represent the Asimov’s estate as its exclusive literary agent.  TMG was engaged to “maintain, sell, license and otherwise exploit” Asimov’s work.  After the relationship between the two began to deteriorate earlier this year, Asimov’s estate sent a letter to TMG stating its “services were terminated as of the end of the original term of the agreement and that TMG was in breach of its duties and obligations.” 

TMG then called attention to the automatic renewal provision in the contract.  The contract provided that the two-year agreement would be automatically renewed for successive two-year periods, unless one side gave written notice of termination 120 days before the next renewal date.  In response, Asimov’s estate asserted that the agreement should be null and void.  The estate claimed that TMG did not inform the estate of the impending automatic renewal, as required by the New York General Obligations Law (“NYGOL”).

According to Title 9 of the NYGOL, an automatic renewal provision in a contract for services is unenforceable unless notice is given to the recipient of the services, informing them of the upcoming automatic renewal.  Specifically, the law calls for notice to be given between fifteen and thirty days of the cancellation deadline.

While many contracts contain this type of provision, there have been few cases directly addressing the enforceability of auto-renewal provisions in contracts.  A recent 2012 case, Ovitz v. Bloomberg, involved a two-year agreement for the lease of equipment.  Ovitz attempted to terminate the agreement after the automatic renewal had taken effect, claiming that Bloomberg had not given sufficient notice prior to the automatic renewal.  Although Ovitz was not ultimately successful in the lawsuit, the court did state that Bloomberg’s failure to comply with the notice obligation in Title 9 rendered the automatic renewal provision inoperative and unenforceable.

Although Title 9 has long been in effect, many are unaware of the obligations it imposes on service providers.  This is evident in the current dispute between Asimov’s estate and TMG.  How the court rules in this case should cause service providers to take pause and closely consider their auto-renewal provisions.

Do you include auto-renewal provisions in your contracts?

Jessica

Jessica Cox

info@RomanoLaw.com

www.RomanoLaw.com

(212) 865-9848

Rose Massary

Rose Massary

info@RomanoLaw.com

www.RomanoLaw.com

(212) 865-9848

 Blog Image:© Depositphotos.com/nito103

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