Legal Question in Business Law in California

It depends. Automatic renewal provisions are very common in textile rental cases. However, not all of these agreements are drafted well and/or are enforceable.

You want to make sure not to breach the agreement as the damages can be high.

Let me know if you want to review the Agreement and discuss options.

Sincerely,

J. Caleb Donner

DONNER & DONNER

LEGAL WARRIORS

910 Hampshire Road, Suite R

Westlake Village, CA 91361

Tel: 805-496-0500

Fax:  805-494-0990

Email:  [email protected]

Website:  www.TextileAttorney.com

While I agree with Mr. Donner that sometimes poor drafting can result in an unenforceable automatic renewal provision, as a general legal rule they are legal and enforceable. I also disagree that damages are usually all that high if you go to court over it. Even if the agreement is fully enforceable (and the unusually long automatic renewal time would be a good place to start in arguing that it is not), the damages you could be liable for is not measured by the number of monthly payments times the term of the renewal. They are only entitled to the payments LESS what it would have cost them to provide the services they are obligated to provide under the contract, AND LESS any mitigation of their damages they are obligated to do. For these reasons, it is almost always possible to negotiate a cancellation agreement at a reasonable cost if there is an alternative that makes business sense to go with, and pay for the cancellation, rather than staying in the agreement.