Tech & Sourcing @ Morgan Lewis


Recently, I found myself explaining that auto-renewal provisions in contracts may not be so automatic in certain states. The discussion arose when my wife stumbled across a $180 charge on our credit card statement for a subscription to a sports package that she previously was unaware of. I explained to her that I had been ordering the subscription for years and that the subscription auto-renewed for the following season unless I opted out within a certain time frame, which had already passed. Afterwards, the following conversation may or may not have taken place:

My wife: “Are automatic renewal provisions in contracts even enforceable?”

Me: “A handful of states have statutes that apply to certain types of contracts and that render automatic renewal provisions in these contracts unenforceable if certain requirements and conditions are not met.”

My wife: “Does New York have a statute like this?”

Me: “It does. In 2006, New York passed General Obligations Law section 5-903, which includes a notice requirement for provisions that automatically extend the term of an agreement for ‘service, maintenance or repair to or for any real or personal property’ for a period greater than one month in order for the provisions to be enforceable against the service recipient. The notice requirement mandates that the service provider issue notice to the service recipient of the existence of the auto-renewal provision at least fifteen days and no more than thirty days before the time when the service recipient must provide notice of its intent not to renew. I’ll email you the full text of the statute so you can take a look.”

My wife: “So what should be considered when enforcing or challenging an automatic renewal provision in New York?”

Me: “Determining whether section 5-903 applies at all is the first step. While section 5-903 extended statutory notice requirements, which previously only applied to leases of real and personal property, to a broader category of agreements, it does not apply to any or every services agreement, and a review of the scope of the agreement is necessary.

One last point to consider—if section 5-903 does apply and the automatic renewal provision is unenforceable, the customer must show the injury or harm he or she incurred (such as termination fees) as a result of the application of the automatic renewal provision in order to get monetary damages or equitable relief.”

In addition to serving as a key distraction to the controversial $180 charge, New York’s General Obligations Law section 5-903 highlights the need to consider the applicable governing law when trying to utilize or challenge the use of an automatic renewal provision.