7 great tips, before you sign IT contracts
By Francis West on 9th December 2015
7 Tips about signing up for IT services
You were impressed by the sales team of your IT provider and signed on the dotted line. Price was good. Service was good – but what about the automatic renewal clause. Just another of the many terms and conditions which we all tick to confirm without a moment’s thought, especially as we are optimistic about the future long-term business relationship. But it can come back to bite.
Although the government has legislated to limit the effect of automatic renewal clauses in consumer contracts, commercial parties to a contract can generally agree to bind themselves to whatever terms they wish and the court will not interfere.
A true story
Recently, a bank took an IT provider to the High Court to try to get out of an automatic renewal clause that renewed automatically for three years on the anniversary of the renewal date unless either side gave 90 days notice. Although the bank gave notice to terminate the agreement on the actual renewal date and claimed that any renewal was only for a year – the Court found in favour of the IT company and said the bank was tied in for a further three years.
An expensive procrastination that highlights the importance of making sure that you know what is in your contract, otherwise you can be tied into an uncommercial arrangement as a wrongful termination of the contract might lead to a claim of damages against you.
So the best tips to avoid this situation:
- Most obviously – do not sign a contract with an automatic renewal clause. If it is part of a standard contract, try to get the clause removed.
- If that is not possible and there is good reason to enter into the contract, consider whether the renewal term is commercially sensible bearing in mind that there may come a time when you want to terminate the contract for unsatisfactory performance or have found a better service arrangement. If it is not commercially sensible, ask for the renewal term to be reduced;
- Above all make sure that the notice period is not overlooked in a busy office or if there is a change in personnel. Request the insertion of a condition in the contract making the automatic renewal clause subject to written notification by the service provider of the upcoming termination window;
- If that is not possible ensure all deadlines are written in big red letters in the key dates diary so that the notice period is not overlooked.
- Once a service contract automatically renews, your service provider might still be willing to enter into negotiations to vary the service contract for the remainder of the renewed term;
- And if all else fails, depending on how the service was entered into there might be a remedy in common law which can bring about a termination of the service contract.
- Lastly, do not accept penalties for breach of contract which are well in excess of a genuine pre-estimate of anticipated losses likely to be suffered because of a breach. A court is likely to strike out a penalty which is simply punitive.
If you have any doubt on your current contracts, we can not recommend Miriam Gitlin high enough to help you. Please contact her direct on 020 3019 0599.
Thank you for writing this most helpful blog for us Mariam.
PGB Gitlin Baker
Dispute Resolution and Litigation solicitors
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