Recent developments in New York law may cause you to think twice before placing an automatic renewal provision in your contract. In 2008, Isaac Asimov's daughter, Robyn Asimov, and widow, Janet Asimov, hired Trident Media Group (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, 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.
Despite many contracts containing auto-renewal provisions, there have been few cases directly addressing the enforceability these types of provisions in agreements. Moreover, many are unaware of the obligations Title 9 imposes on service providers. The legal restrictions do not end there.
In 2021, New York passed the Automatic Renewal Law ("ARL"), targeting subscription services. The ARL now requires businesses to make the terms of automatic renewal subscriptions clear and conspicuous—meaning that the provision has to be both easy to understand and visually distinct from the rest of the agreement (either in bold face, italics, or larger font). Furthermore, the consumer has to affirmatively consent to the automatic renewal. The business must also clearly communicate how to cancel the subscription and allow for cancellation through the same method of enrollment. If the consumer can sign up for the services online, then they must be able to terminate the agreement online as well.
As a result of Asimov v. TMG and the newly passed ALR, service providers should take pause and closely consider their auto-renewal provisions. The requirements are stricter than ever and can easily render contracts unenforceable.
Do you include auto-renewal provisions in your contracts?
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