Automatic Contract Renewal Terms – go find your contract or you could get screwed
Posted On: - November 24th, 2009
It happens all too often to the unsuspecting customer. The automatic contract renewal clause. The clause itself has some merit, it's the auto renewal term that could cause problems.
Every contract needs a term, and generally the longer the term the better the deal. The clause exists in all sorts of contracts of course, but, in this case I am speaking of the clause as it relates to telecom contracts.
The dilemma is as follows: Let's use a standard contract for PRI. If a customer signed a 5 year PRI contract in 2004 which is coming due today November 2009 they signed the contract at 2004 going rates. In 2004 the going rate for a full PRI would have been $890 / month. At that time a competitive rate. Fast forward 5 years later, and with the constant downward pressure on rates the 2004 rate, in 2009 is expensive. The current PRI rate on a 5-year contract could be as low as $610 / month.
Fair enough. In 2004 the customer got a fair contract for a fair value. That's not the problem.
You see, when the customer signed the contract they might have been very aware of the following clause (I pulled this clause from a Bell Canada contract. All the carriers have this clause in their contracts, Bell happens to be an easy culprit). This could be in your Rogers, Telus, AT&T, Verizon ... contract.
Renewal Term(s): Unless the Customer or Bell gives a notice to the other as described in Section 3(e), each Service Schedule will automatically be renewed at the end of the Initial Service Term on the same terms and conditions for the consecutive renewal period(s) set out in that Service Schedule. If there is no renewal period set out in a Service Schedule, then that Service Schedule will expire and the Services provided under it will be terminated at the end of the Initial Service Term.
2004 was a long time ago. The customer signing an agreement with this clause might have been very aware of what they were signing. The problem is, when the 2009 renewal date revolves, unless the customer remembered they might have been unwillingly renewed into what is now a very uncompetitive rate.
Do you think the carriers send a notice out to their clients advising them of these renewals?
ABSOLUTELY NOT. You're on your own.
I'm speaking from experience here - very few customers know their renewal date. Chances are the person that signed the agreement in the first place is no longer in charge of contracts, or the IT person has no idea they even have a contract ... you get the point. Once the agreement has been signed it's neatly filed into a folder never to be found again.
Very few customers are aware of their current PRI contract terms, or for that matter, even know where their contract is. And the carriers will hold you to these contracts.
Now that you have read this post, go find your carrier contract. Make note of your renewal terms and dates because chances are the rates your signed your contract at are no longer competitive in the current market.
Written by: Jeff Wiener. www.digitcom.ca.