A big frustration for businesspeople in financing and leasing business and commercial equipment comes after they fail to read the fine print in contracts.
Commonly found in financing and leasing contracts, evergreen clauses are designed to keep customers committed to an agreement beyond the original term.
To the rescue: LeaseQ, www.leaseq.com.
LeaseQ provided insider tips to business owners on coping with evergreen clauses. Based in Boston, LeaseQ is one of the leading providers of business and commercial equipment leasing and financing to small and large companies.
Evergreen clauses basically allow the lease term to automatically renew at the end of the lease, unless one party or the other provides notice to the other of their intent not to renew – usually no less than 30 days before the end of the current term.
Typical evergreen-clause wording
Evergreen clauses may be worded any number of ways, but they do share common characteristics, namely that they keep the contract active longer, and do provide a mechanism, however nebulous, for ending the agreement.
They may also create serious hurdles to be overcome before the agreement can be nullified.
Evergreen clauses are designed to benefit the one providing the service, but can become a headache for the person receiving the service.
You see, most people simply do not review lease agreements months or years into the term. The clause sneaks up and is in effect before anyone is aware of it.
Evergreen clauses should be identified and agreed to only for very good reason, such as the locking in of a given price or rate. In most cases, they are best avoided, with simple refusal to sign unless the clause is removed. In many cases, lining it out and initialing where it was done will be enough to void the clause.
Try to negotiate elimination of the clause from the contract (see: Leadership Best Practices in Negotiations – 22 Dos, Don’ts).
If for whatever reason, it is impossible to avoid the evergreen clause, then evoking the clause is the single best method of protection.
Two of the most common include:
- Sometime before: This agreement shall automatically renew for another one year term, unless either party provides notice to the other of its intent to terminate this agreement not less than 30 days before the end of the then current term.
- Sometime within: This agreement shall automatically renew for another one-year term, unless either party provides notice to the other of its intent to terminate this agreement within 30 days of the end of the then current term.
Evoking the first example is the easiest, since it simply involves sending notice to the other party. The second is harder, since it involves creating a calendar item and sending notice of intent not to renew within the time frame.
For that matter, evergreen clauses are annoyingly prevalent everywhere — even in some antivirus provider agreements.
Good luck and read the fine print.
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