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Don’t roll over automatically February 9, 2011

Posted by Brian Schar in General.
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In-house counsel with patent responsibilities often perform legal review of general contracts as well.  Some of those contracts will include a provision where the agreement has a set term, but then rolls over for an additional period of time unless terminated.  Sometimes, this doesn’t matter very much – such as contracts for ongoing services where the rollover period is short (e.g., 1 month) and termination can be effected on a basis of less than 30 days. 

Sometimes, this provision does matter very much.  Beware of contracts in which the rollover term is a year or more, or in which more than 30 days advance notice is required to terminate.  Better yet, unless there is a burning need for an automatic rollover, push back and delete that provision altogether.  Invariably, the rollover will occur in a contract in which you’re already having problems with the other side, and no one calendared the duration of the advance notice period, or even noticed until it was too late.

Be particularly wary of rollovers in an agreement with a company that just acquired or merged with your previous supplier.  You are not guaranteed to like the new entity or its services as well as the original.

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