An automatic extension clause allows an agreement to be continued for a defined period if the existing agreement is not renegotiated within a specified period of time compared to the expiry of the current contract. The duration of the extension depends on the specific language of the contract, but these clauses generally provide that the contract is automatically renewed for the same period (or a shorter duration), unless one party gives the other party its wish to terminate the contract on a fixed and predetermined date (i.e. 60 days before expiry). If the contract does not provide a deadline for the renewal of the contract, it can usually be extended indefinitely. However, the federal government recently released a bill to extend the protection of consumer law clauses to contracts with low commercial terms, which are available in standard form and are for a sum of money below a prescribed threshold. Contract terms that allow a party to unilaterally renew a contract have been described by the government as an unfair term for small businesses, particularly in the waste management sector. Hire-purchase agreements can also be granted by car dealers. Suppose a consumer rents a car for four years. At the end of this period, the tenant may decide to buy a brand new car or to start another rental contract. The dealer may grant an extension of the original lease agreement if the new replacement vehicle is not yet available. Below is an example of a state law dealing with automatic renewal clauses: however, as soon as a service contract is automatically renewed, all is not lost.
Depending on the circumstances surrounding the entry into the service contract, there may be remedies which, under customary law, could result in a separate right to terminate the service contract. Many collective agreements in the federal sector have a provision that is normally found at the end of the agreement and that states that if neither party sends its intention to reopen and renegotiate the contract within 105-60 days of the contract, the contract will be automatically renewed for a period of x years. An automatically renewed contract can also serve as a contractual bar. A lease extension can be made between a landlord and a tenant….