Legal Question in Business Law in California

Evergreen Clause

Is the Evergreen Clause valid in the state of California for commercial business to business services? For instance, a company has had the same business service for 10 years, but 6-months ago it automatically renewed for another two years. When they go to terminate it, and it has ''rolled over'', and they can't get out. They fulfilled the initial term of the agreement, but it's continually rolling over. Any insight on how they can terminate the contract would be helpful...


Asked on 4/27/09, 1:43 pm

2 Answers from Attorneys
Deborah Barron Barron Law Corporation

Re: Evergreen Clause

Yes, evergreen clauses are legal. The only time they have been legally questioned is when the clause is written in a way that is unclear so as to not be clearly recognizable as automatically renewing the contract.

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Answered on 4/27/09, 2:08 pm
George Grellas George Grellas & Associates

Re: Evergreen Clause

Clauses such as these will inevitably contain language specifying that the contract can be terminated by giving some form of notice prior to the expiration of the initial term or that of the renewed term. Timely notice of this type will terminate the contract at the expiration of the then-current term. Apart from this, under California law, the auto-renew provision is normally enforceable unless it is framed in such a way as to violate public policy (for example, if it did not provide for termination upon timely notice prior to the auto-renew).

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Answered on 4/27/09, 2:48 pm


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